For many, the main point of investing is to generate higher returns than the overall market. But the main game is to find enough winners to more than offset the losers So we wouldn’t blame long term Panasonic Manufacturing Malaysia Berhad (KLSE:PANAMY) shareholders for doubting their decision to hold, with the stock down 54% over a half decade. The falls have accelerated recently, with the share price down 13% in the last three 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 Panasonic Manufacturing Malaysia Berhad

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

During the five years over which the share price declined, Panasonic Manufacturing Malaysia Berhad’s earnings per share (EPS) dropped by 5.2% each year. Readers should note that the share price has fallen faster than the EPS, at a rate of 14% per year, over the period. This implies that the market was previously too optimistic about the stock. The low P/E ratio of 11.99 further reflects this reticence.

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

We know that Panasonic Manufacturing Malaysia Berhad has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Panasonic Manufacturing Malaysia Berhad, it has a TSR of -40% 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!

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A Different Perspective

While the broader market gained around 9.5% in the last year, Panasonic Manufacturing Malaysia Berhad shareholders lost 18% (even including dividends). 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. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 7% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It’s always interesting to track share price performance over the longer term. But to understand Panasonic Manufacturing Malaysia Berhad better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we’ve spotted 1 warning sign for Panasonic Manufacturing Malaysia Berhad you should know about.

If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Malaysian exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.