In order to justify the effort of selecting individual stocks, it’s worth striving to beat the returns from a market index fund. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Mountview Estates P.L.C. (LON:MTVW) shareholders have had that experience, with the share price dropping 15% in three years, versus a market return of about 50%.

Now let’s have a look at the company’s fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

We’ve found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).

Mountview Estates saw its EPS decline at a compound rate of 4.4% per year, over the last three years. This fall in EPS isn’t far from the rate of share price decline, which was 5% per year. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. In this case, it seems that the EPS is guiding the share price.

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

It’s good to see that there was some significant insider buying in the last three months. That’s a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. 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 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. As it happens, Mountview Estates’ TSR for the last 3 years was 1.3%, which exceeds the share price return mentioned earlier. And there’s no prize for guessing that the dividend payments largely explain the divergence!

Mountview Estates provided a TSR of 17% over the year (including dividends). That’s fairly close to the broader market return. That gain looks pretty satisfying, and it is even better than the five-year TSR of 4% per year. It is possible that management foresight will bring growth well into the future, even if the share price slows down. 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. Even so, be aware that Mountview Estates is showing 2 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable…