Ideally, your overall portfolio should beat the market average. But even in a market-beating portfolio, some stocks will lag the market. The Favelle Favco Berhad (KLSE:FAVCO) stock price is down 27% over five years, but the total shareholder return is 28% once you include the dividend. And that total return actually beats the market decline of 2.0%.

Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

See our latest analysis for Favelle Favco Berhad

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Looking back five years, both Favelle Favco Berhad's share price and EPS declined; the latter at a rate of 6.0% per year. In this case, the EPS change is really very close to the share price drop of 6% a year. This suggests that market participants have not changed their view of the company all that much. Rather, the share price change has reflected changes in earnings per share.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, Favelle Favco Berhad's TSR for the last 5 years was 28%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Favelle Favco Berhad shareholders have received a total shareholder return of 10% over one year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 5% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 2 warning signs for Favelle Favco Berhad that you should be aware of.