Many investors define successful investing as beating the market average over the long term. But the risk of stock picking is that you will likely buy under-performing companies. Unfortunately, that’s been the case for longer term Microequities Asset Management Group Limited (ASX:MAM) shareholders, since the share price is down 16% in the last three years, falling well short of the market return of around 30%.

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

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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 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.

During the three years that the share price fell, Microequities Asset Management Group’s earnings per share (EPS) dropped by 20% each year. This fall in the EPS is worse than the 6% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.

The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It might be well worthwhile taking a look at our free report on Microequities Asset Management Group’s earnings, revenue and cash flow.

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Microequities Asset Management Group, it has a TSR of 0.9% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

It’s good to see that Microequities Asset Management Group has rewarded shareholders with a total shareholder return of 9.5% in the last twelve months. That’s including the dividend. However, the TSR over five years, coming in at 11% per year, is even more impressive. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We’ve identified 3 warning signs with Microequities Asset Management Group (at least 1 which is potentially serious) , and understanding them should be part of your investment process.