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 Xerox Holdings Corporation (NASDAQ:XRX) share price is a whole 75% lower. We certainly feel for shareholders who bought near the top. And we doubt long term believers are the only worried holders, since the stock price has declined 50% over the last twelve months.

Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they’ve been consistent with returns.

See our latest analysis for Xerox Holdings

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).

Over five years Xerox Holdings’ earnings per share dropped significantly, falling to a loss, with the share price also lower. This was, in part, due to extraordinary items impacting earnings. At present it’s hard to make valid comparisons between EPS and the share price. But we would generally expect a lower price, given the situation.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It might be well worthwhile taking a look at our free report on Xerox Holdings’ earnings, revenue and cash flow.

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Xerox Holdings the TSR over the last 5 years was -66%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

Xerox Holdings shareholders are down 47% for the year (even including dividends), but the market itself is up 26%. 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. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 11% per year over five years. We realise that Baron Rothschild has said investors should “buy when there is blood on the streets”, but we caution that investors should first be sure they are buying a high quality business. 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 3 warning signs for Xerox Holdings (2 are concerning) that you should be aware of.