When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Furthermore, you’d generally like to see the share price rise faster than the market. Unfortunately for shareholders, while the Moody’s Corporation (NYSE:MCO) share price is up 82% in the last five years, that’s less than the market return. On a brighter note, more newer shareholders are probably rather content with the 20% share price gain over twelve months.

So let’s investigate and see if the longer term performance of the company has been in line with the underlying business’ progress.

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In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).

Over half a decade, Moody’s managed to grow its earnings per share at 7.5% a year. This EPS growth is lower than the 13% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That’s not necessarily surprising considering the five-year track record of earnings growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Moody’s has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

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. As it happens, Moody’s’ TSR for the last 5 years was 90%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

It’s nice to see that Moody’s shareholders have received a total shareholder return of 21% over the last year. Of course, that includes the dividend. That’s better than the annualised return of 14% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Even so, be aware that Moody’s is showing 2 warning signs in our investment analysis , you should know about…