In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But even the best stock picker will only win with some selections. At this point some shareholders may be questioning their investment in Stadler Rail AG (VTX:SRAIL), since the last five years saw the share price fall 43%. And some of the more recent buyers are probably worried, too, with the stock falling 27% in the last year.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for Stadler Rail

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Looking back five years, both Stadler Rail's share price and EPS declined; the latter at a rate of 2.3% per year. This reduction in EPS is less than the 11% annual reduction in the share price. This implies that the market was previously too optimistic about the stock.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It might be well worthwhile taking a look at our free report on Stadler Rail's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Stadler Rail the TSR over the last 5 years was -35%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Investors in Stadler Rail had a tough year, with a total loss of 24% (including dividends), against a market gain of about 9.9%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should be aware of the 1 warning sign we've spotted with Stadler Rail .