Most people feel a little frustrated if a stock they own goes down in price. But in the short term the market is a voting machine, and the share price movements may not reflect the underlying business performance. The MSC Industrial Direct Co., Inc. (NYSE:MSM) is down 12% over a year, but the total shareholder return is -8.5% once you include the dividend. That's better than the market which declined 23% over the last year. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 0.8% in three years. It's down 12% in about a month. But this could be related to poor market conditions -- stocks are down 11% in the same time.

After losing 5.9% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

See our latest analysis for MSC Industrial Direct

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 unfortunate twelve months during which the MSC Industrial Direct share price fell, it actually saw its earnings per share (EPS) improve by 49%. It's quite possible that growth expectations may have been unreasonable in the past.

It's fair to say that the share price does not seem to be reflecting the EPS growth. But we might find some different metrics explain the share price movements better.

We don't see any weakness in the MSC Industrial Direct's dividend so the steady payout can't really explain the share price drop. From what we can see, revenue is pretty flat, so that doesn't really explain the share price drop. Of course, it could simply be that it simply fell short of the market consensus expectations.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. If you are thinking of buying or selling MSC Industrial Direct stock, you should check out this free report showing analyst profit forecasts.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for MSC Industrial Direct the TSR over the last 1 year was -8.5%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Although it hurts that MSC Industrial Direct returned a loss of 8.5% in the last twelve months, the broader market was actually worse, returning a loss of 23%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 5% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. It's always interesting to track share price performance over the longer term. But to understand MSC Industrial Direct better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for MSC Industrial Direct you should know about.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

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