We think intelligent long term investing is the way to go. But that doesn’t mean long term investors can avoid big losses. For example, after five long years the HUYA Inc. (NYSE:HUYA) share price is a whole 77% lower. That’s an unpleasant experience for long term holders. And it’s not just long term holders hurting, because the stock is down 39% in the last year. In contrast, the stock price has popped 9.3% in the last thirty days. But this could be related to good market conditions, with stocks up around 13% during the period.

Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they’ve been consistent with returns.

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To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ 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.

We know that HUYA has been profitable in the past. On the other hand, it reported a trailing twelve months loss, suggesting it isn’t reliably profitable. Other metrics may better explain the share price move.

We note that the dividend has remained healthy, so that wouldn’t really explain the share price drop. It could be that the revenue decline of 12% per year is viewed as evidence that HUYA is shrinking. With revenue weak, and increased payouts of cash, the market might be taking the view that its best days are behind it.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

HUYA is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So we recommend checking out this free report showing consensus forecasts

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for HUYA the TSR over the last 5 years was -66%, which is better than the share price return mentioned above. And there’s no prize for guessing that the dividend payments largely explain the divergence!