If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But long term PZ Cussons plc (LON:PZC) shareholders have had a particularly rough ride in the last three year. Sadly for them, the share price is down 63% in that time.

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.

Our free stock report includes 2 warning signs investors should be aware of before investing in PZ Cussons. Read for free now.

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.

PZ Cussons has made a profit in the past. However, it made a loss in the last twelve months, suggesting profit may be an unreliable metric at this stage. Other metrics might give us a better handle on how its value is changing over time.

We note that the dividend has declined – a likely contributor to the share price drop. The revenue decline, at an annual rate of 5.0% over three years, might be considered salt in the wound.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

If you are thinking of buying or selling PZ Cussons stock, you should check out this FREE detailed report on its balance sheet.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, PZ Cussons’ TSR for the last 3 years was -58%, which exceeds the share price return mentioned earlier. And there’s no prize for guessing that the dividend payments largely explain the divergence!

Investors in PZ Cussons had a tough year, with a total loss of 11% (including dividends), against a market gain of about 6.6%. 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. However, the loss over the last year isn’t as bad as the 8% per annum loss investors have suffered over the last half decade. We’d need to see some sustained improvements in the key metrics before we could muster much enthusiasm. 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 2 warning signs for PZ Cussons you should be aware of, and 1 of them makes us a bit uncomfortable.