Investors in Nestlé (Malaysia) Berhad (KLSE:NESTLE) have unfortunately lost 27% over the last five years

Ideally, your overall portfolio should beat the market average. But even the best stock picker will only win with some selections. So we wouldn't blame long term Nestlé (Malaysia) Berhad (KLSE:NESTLE) shareholders for doubting their decision to hold, with the stock down 34% over a half decade.

Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

See our latest analysis for Nestlé (Malaysia) Berhad

There is no denying that markets are sometimes efficient, but prices do not always reflect 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).

Looking back five years, both Nestlé (Malaysia) Berhad's share price and EPS declined; the latter at a rate of 4.7% per year. This reduction in EPS is less than the 8% annual reduction in the share price. This implies that the market was previously too optimistic about the stock.

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

This free interactive report on Nestlé (Malaysia) Berhad's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Nestlé (Malaysia) Berhad the TSR over the last 5 years was -27%, 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

Investors in Nestlé (Malaysia) Berhad had a tough year, with a total loss of 13% (including dividends), against a market gain of about 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5% over the last half decade. 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. It's always interesting to track share price performance over the longer term. But to understand Nestlé (Malaysia) Berhad better, we need to consider many other factors. Even so, be aware that Nestlé (Malaysia) Berhad is showing 2 warning signs in our investment analysis , and 1 of those is a bit unpleasant...

Of course Nestlé (Malaysia) Berhad may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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