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. We regret to report that long term Venture Corporation Limited (SGX:V03) shareholders have had that experience, with the share price dropping 26% in three years, versus a market return of about 20%.

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.

Check out our latest analysis for Venture

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).

Venture saw its EPS decline at a compound rate of 7.5% per year, over the last three years. This fall in EPS isn’t far from the rate of share price decline, which was 9% per year. So it seems like sentiment towards the stock hasn’t changed all that much over time. In this case, it seems that the EPS is guiding the share price.

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

It’s probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of Venture’s earnings, revenue and cash flow.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Venture the TSR over the last 3 years was -14%, which is better than the share price return mentioned above. And there’s no prize for guessing that the dividend payments largely explain the divergence!

Investors in Venture had a tough year, with a total loss of 6.4% (including dividends), against a market gain of about 23%. 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. Longer term investors wouldn’t be so upset, since they would have made 2%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. For instance, we’ve identified 1 warning sign for Venture that you should be aware of.