For many, the main point of investing is to generate higher returns than the overall market. But even the best stock picker will only win with some selections. At this point some shareholders may be questioning their investment in Cashbuild Limited (JSE:CSB), since the last five years saw the share price fall 46%. And we doubt long term believers are the only worried holders, since the stock price has declined 34% over the last twelve months. The falls have accelerated recently, with the share price down 20% in the last three months.

It’s worthwhile assessing if the company’s economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let’s do just that.

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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. 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 Cashbuild’s share price and EPS declined; the latter at a rate of 2.2% per year. Readers should note that the share price has fallen faster than the EPS, at a rate of 12% per year, over the period. So it seems the market was too confident about the business, in the past. The less favorable sentiment is reflected in its current P/E ratio of 11.72.

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 Cashbuild has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Cashbuild will grow revenue in the future.

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Cashbuild the TSR over the last 5 years was -28%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

Cashbuild shareholders are down 31% for the year (even including dividends), but the market itself is up 31%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5% over the last half decade. 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. It’s always interesting to track share price performance over the longer term. But to understand Cashbuild better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we’ve spotted with Cashbuild .