Investors in Mesaieed Petrochemical Holding Company Q.P.S.C (DSM:MPHC) have unfortunately lost 35% over the last three years

Many investors define successful investing as beating the market average over the long term. But if you try your hand at stock picking, you risk returning less than the market. We regret to report that long term Mesaieed Petrochemical Holding Company Q.P.S.C. (DSM:MPHC) shareholders have had that experience, with the share price dropping 44% in three years, versus a market decline of about 6.6%.

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.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

Mesaieed Petrochemical Holding Company Q.P.S.C saw its EPS decline at a compound rate of 29% per year, over the last three years. This fall in the EPS is worse than the 18% compound annual share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in.

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

Dive deeper into Mesaieed Petrochemical Holding Company Q.P.S.C's key metrics by checking this interactive graph of Mesaieed Petrochemical Holding Company Q.P.S.C's earnings, revenue and cash flow.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Mesaieed Petrochemical Holding Company Q.P.S.C the TSR over the last 3 years was -35%, 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

Mesaieed Petrochemical Holding Company Q.P.S.C shareholders are down 17% for the year (even including dividends), but the market itself is up 16%. 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 4% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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 Mesaieed Petrochemical Holding Company Q.P.S.C , and understanding them should be part of your investment process.

We will like Mesaieed Petrochemical Holding Company Q.P.S.C better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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