When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Furthermore, you’d generally like to see the share price rise faster than the market. Unfortunately for shareholders, while the ResMed Inc. (NYSE:RMD) share price is up 49% in the last five years, that’s less than the market return. However, more recent buyers should be happy with the increase of 36% over the last year.

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

Check out our latest analysis for ResMed

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.

During five years of share price growth, ResMed achieved compound earnings per share (EPS) growth of 21% per year. This EPS growth is higher than the 8% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that ResMed has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for ResMed the TSR over the last 5 years was 56%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

It’s good to see that ResMed has rewarded shareholders with a total shareholder return of 37% in the last twelve months. Of course, that includes the dividend. That’s better than the annualised return of 9% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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 1 warning sign for ResMed you should be aware of.