Earnings growth of 3.1% over 5 years hasn't been enough to translate into positive returns for Marks and Spencer Group (LON:MKS) shareholders

Statistically speaking, long term investing is a profitable endeavour. But no-one is immune from buying too high. Zooming in on an example, the Marks and Spencer Group plc (LON:MKS) share price dropped 70% in the last half decade. We certainly feel for shareholders who bought near the top. And some of the more recent buyers are probably worried, too, with the stock falling 43% in the last year. Furthermore, it's down 26% in about a quarter. That's not much fun for holders.

With the stock having lost 6.8% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for Marks and Spencer Group

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Marks and Spencer Group became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.

The revenue fall of 1.7% per year for five years is neither good nor terrible. But it's quite possible the market had expected better; a closer look at the revenue trends might explain the pessimism.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Marks and Spencer Group is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So we recommend checking out this free report showing consensus forecasts

What About The Total Shareholder Return (TSR)?

We've already covered Marks and Spencer Group's share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Marks and Spencer Group's TSR of was a loss of 64% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

We regret to report that Marks and Spencer Group shareholders are down 43% for the year. Unfortunately, that's worse than the broader market decline of 11%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Marks and Spencer Group , and understanding them should be part of your investment process.

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 GB exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.