The five-year shareholder returns and company earnings persist lower as Aurizon Holdings (ASX:AZJ) stock falls a further 3.3% in past week

Ideally, your overall portfolio should beat the market average. But even the best stock picker will only win with some selections. At this point some shareholders may be questioning their investment in Aurizon Holdings Limited (ASX:AZJ), since the last five years saw the share price fall 39%. Shareholders have had an even rougher run lately, with the share price down 11% in the last 90 days.

After losing 3.3% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

We've discovered 2 warning signs about Aurizon Holdings. View them for free.

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.

Looking back five years, both Aurizon Holdings' share price and EPS declined; the latter at a rate of 5.0% per year. Readers should note that the share price has fallen faster than the EPS, at a rate of 9% per year, over the period. This implies that the market was previously too optimistic about the stock.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on Aurizon Holdings' earnings, revenue and cash flow.

What About Dividends?

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Aurizon Holdings, it has a TSR of -19% 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!

A Different Perspective

Aurizon Holdings shareholders are down 17% for the year (even including dividends), but the market itself is up 9.5%. 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 3% per year over five years. 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. 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. Take risks, for example - Aurizon Holdings has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

Aurizon Holdings is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.

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