When you buy and hold a stock for the long term, you definitely want it to provide a positive return. But more than that, you probably want to see it rise more than the market average. Unfortunately for shareholders, while the Starbucks Corporation (NASDAQ:SBUX) share price is up 24% in the last five years, that’s less than the market return. Zooming in, the stock is up a respectable 16% in 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.

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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 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).

Starbucks’ earnings per share are down 0.7% per year, despite strong share price performance over five years.

With EPS falling, but a modestly increasing share price, it seems that the market was probably too pessimistic about the stock in the past. In the long term, though, it will be hard for the share price rises to continue without improving EPS.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. As it happens, Starbucks’ TSR for the last 5 years was 38%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

We’re pleased to report that Starbucks shareholders have received a total shareholder return of 18% over one year. And that does include the dividend. That’s better than the annualised return of 7% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It’s always interesting to track share price performance over the longer term. But to understand Starbucks better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we’ve spotted with Starbucks (including 1 which can’t be ignored) .