Many investors define successful investing as beating the market average over the long term. But if you try your hand at stock picking, you risk returning less than the market. Unfortunately, that’s been the case for longer term GP Industries Limited (SGX:G20) shareholders, since the share price is down 22% in the last three years, falling well short of the market decline of around 6.1%. And the share price decline continued over the last week, dropping some 5.9%. But this could be related to the soft market, which is down about 12% in the same period.

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 markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).

GP Industries saw its share price decline over the three years in which its EPS also dropped, falling to a loss. Due to the loss, it’s not easy to use EPS as a reliable guide to the business. However, we can say we’d expect to see a falling share price in this scenario.

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

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

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of GP Industries, it has a TSR of -10% for the last 3 years. That exceeds its share price return that we previously mentioned. And there’s no prize for guessing that the dividend payments largely explain the divergence!

While the broader market gained around 8.1% in the last year, GP Industries shareholders lost 4.7% (even including dividends). 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. Longer term investors wouldn’t be so upset, since they would have made 1.7%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It’s always interesting to track share price performance over the longer term. But to understand GP Industries better, we need to consider many other factors. To that end, you should be aware of the 3 warning signs we’ve spotted with GP Industries .