When we invest, we’re generally looking for stocks that outperform the market average. And in our experience, buying the right stocks can give your wealth a significant boost. For example, long term Livestock Improvement Corporation Limited (NZSE:LIC) shareholders have enjoyed a 41% share price rise over the last half decade, well in excess of the market decline of around 5.6% (not including dividends).

So let’s investigate and see if the longer term performance of the company has been in line with the underlying business’ progress.

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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

During five years of share price growth, Livestock Improvement actually saw its EPS drop 2.4% per year.

So it’s hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. Therefore, it’s worth taking a look at other metrics to try to understand the share price movements.

There’s no sign of growing dividends, which might have explained the resilient share price. Five-year revenue growth isn’t impressive. It may be that a closer look at revenue trends can explain the share price.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

If you are thinking of buying or selling Livestock Improvement stock, you should check out this FREE detailed report on its balance sheet.

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Livestock Improvement, it has a TSR of 210% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

While the broader market gained around 4.1% in the last year, Livestock Improvement shareholders lost 11% (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. On the bright side, long term shareholders have made money, with a gain of 25% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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 Livestock Improvement is showing 4 warning signs in our investment analysis , and 2 of those make us uncomfortable…