Pulling back 19% this week, Kossan Rubber Industries Bhd's KLSE:KOSSAN) five-year decline in earnings may be coming into investors focus

The main aim of stock picking is to find the market-beating stocks. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in Kossan Rubber Industries Bhd (KLSE:KOSSAN), since the last five years saw the share price fall 18%. It's down 20% in about a quarter.

Since Kossan Rubber Industries Bhd has shed RM1.2b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for Kossan Rubber Industries Bhd

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.

During the five years over which the share price declined, Kossan Rubber Industries Bhd's earnings per share (EPS) dropped by 16% each year. This fall in the EPS is worse than the 4% compound annual share price fall. So investors might expect EPS to bounce back -- or they may have previously foreseen the EPS decline. With a P/E ratio of 54.49, it's fair to say the market sees a brighter future for the business.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. We note that for Kossan Rubber Industries Bhd the TSR over the last 5 years was 10%, 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

Kossan Rubber Industries Bhd provided a TSR of 2.7% over the last twelve months. But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 2% over half a decade It is possible that returns will improve along with the business fundamentals. It's always interesting to track share price performance over the longer term. But to understand Kossan Rubber Industries Bhd better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Kossan Rubber Industries Bhd you should know about.

Of course Kossan Rubber Industries Bhd 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.