When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Better yet, you’d like to see the share price move up more than the market average. But Home Bancshares, Inc. (Conway, AR) (NYSE:HOMB) has fallen short of that second goal, with a share price rise of 64% over five years, which is below the market return. However, more recent buyers should be happy with the increase of 22% over the last year.

So let’s assess the underlying fundamentals over the last 5 years and see if they’ve moved in lock-step with shareholder returns.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. 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.

Over half a decade, Home Bancshares (Conway AR) managed to grow its earnings per share at 10% a year. This EPS growth is remarkably close to the 10% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. Indeed, it would appear the share price is reacting to the EPS.

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

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. 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 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. In the case of Home Bancshares (Conway AR), it has a TSR of 89% for the last 5 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!

It’s nice to see that Home Bancshares (Conway AR) shareholders have received a total shareholder return of 25% over the last year. And that does include the dividend. That’s better than the annualised return of 14% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 Home Bancshares (Conway AR) is showing 1 warning sign in our investment analysis , you should know about…