The main aim of stock picking is to find the market-beating stocks. But the main game is to find enough winners to more than offset the losers So we wouldn’t blame long term Signify N.V. (AMS:LIGHT) shareholders for doubting their decision to hold, with the stock down 43% over a half decade. More recently, the share price has dropped a further 12% in a month. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.

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.

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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).

During the unfortunate half decade during which the share price slipped, Signify actually saw its earnings per share (EPS) improve by 2.6% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

Based on these numbers, we’d venture that the market may have been over-optimistic about forecast growth, half a decade ago. Having said that, we might get a better idea of what’s going on with the stock by looking at other metrics.

We note that the dividend has remained healthy, so that wouldn’t really explain the share price drop. While it’s not completely obvious why the share price is down, a closer look at the company’s history might help explain it.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Signify is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Signify’s TSR for the last 5 years was -23%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.