As an investor its worth striving to ensure your overall portfolio beats the market average. But if you try your hand at stock picking, you risk returning less than the market. We regret to report that long term First Ship Lease Trust (SGX:D8DU) shareholders have had that experience, with the share price dropping 42% in three years, versus a market return of about 26%. Shareholders have had an even rougher run lately, with the share price down 20% in the last 90 days.

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.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

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. 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).

First Ship Lease Trust became profitable within the last five years. We would usually expect to see the share price rise as a result. So it’s worth looking at other metrics to try to understand the share price move.

We think that the revenue decline over three years, at a rate of 46% per year, probably had some shareholders looking to sell. After all, if revenue keeps shrinking, it may be difficult to find earnings growth in the future.

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

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

Investors should note that there’s a difference between First Ship Lease Trust’s total shareholder return (TSR) and its share price change, which we’ve covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for First Ship Lease Trust shareholders, and that cash payout contributed to why its TSR of 13%, over the last 3 years, is better than the share price return.

First Ship Lease Trust provided a TSR of 8.1% over the last twelve months. But that was short of the market average. If we look back over five years, the returns are even better, coming in at 24% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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. Case in point: We’ve spotted 2 warning signs for First Ship Lease Trust you should be aware of.