We think intelligent long term investing is the way to go. But that doesn’t mean long term investors can avoid big losses. For example, after five long years the Gelsenwasser AG (FRA:WWG) share price is a whole 64% lower. We certainly feel for shareholders who bought near the top.

With that in mind, it’s worth seeing if the company’s underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the five years over which the share price declined, Gelsenwasser’s earnings per share (EPS) dropped by 1.2% each year. Readers should note that the share price has fallen faster than the EPS, at a rate of 18% per year, over the period. This implies that the market is more cautious about the business these days.

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

We’re pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. 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. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Gelsenwasser, it has a TSR of -59% for the last 5 years. That exceeds its share price return that we previously mentioned. And there’s no prize for guessing that the dividend payments largely explain the divergence!

Gelsenwasser’s TSR for the year was broadly in line with the market average, at 17%. To take a positive view, the gain is pleasing, and it sure beats annualized TSR loss of 10%, which was endured over half a decade. While ‘turnarounds seldom turn’ there are green shoots for Gelsenwasser. 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. Take risks, for example – Gelsenwasser has 1 warning sign we think you should be aware of.