These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But even in a market-beating portfolio, some stocks will lag the market. While the Vtech Holdings Limited (HKG:303) share price is down 35% over half a decade, the total return to shareholders (which includes dividends) was 0.5%. And that total return actually beats the market decline of 8.1%.

While the last five years has been tough for Vtech Holdings shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

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 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.

Looking back five years, both Vtech Holdings' share price and EPS declined; the latter at a rate of 3.7% per year. Readers should note that the share price has fallen faster than the EPS, at a rate of 8% per year, over the period. This implies that the market was previously too optimistic about the stock. The low P/E ratio of 9.52 further reflects this reticence.

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

This free interactive report on Vtech Holdings' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Vtech Holdings the TSR over the last 5 years was 0.5%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Vtech Holdings shareholders have received a total shareholder return of 11% over the last year. Of course, that includes the dividend. That's better than the annualised return of 0.1% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Case in point: We've spotted 2 warning signs for Vtech Holdings you should be aware of, and 1 of them is concerning.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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