DS Smith (LON:SMDS) investors are sitting on a loss of 9.7% if they invested five years ago

While not a mind-blowing move, it is good to see that the DS Smith Plc (LON:SMDS) share price has gained 26% in the last three months. But over the last half decade, the stock has not performed well. You would have done a lot better buying an index fund, since the stock has dropped 30% in that half decade.

It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.

View our latest analysis for DS Smith

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the unfortunate half decade during which the share price slipped, DS Smith actually saw its earnings per share (EPS) improve by 7.0% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Alternatively, growth expectations may have been unreasonable in the past.

Due to the lack of correlation between the EPS growth and the falling share price, it's worth taking a look at other metrics to try to understand the share price movement.

The most recent dividend was actually lower than it was in the past, so that may have sent the share price lower.

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

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. This free report showing analyst forecasts should help you form a view on DS Smith

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for DS Smith the TSR over the last 5 years was -9.7%, 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

While it's never nice to take a loss, DS Smith shareholders can take comfort that , including dividends,their trailing twelve month loss of 0.6% wasn't as bad as the market loss of around 1.6%. Of far more concern is the 1.9% p.a. loss served to shareholders over the last five years. While the losses are slowing we doubt many shareholders are happy with the stock. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with DS Smith (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

DS Smith is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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