Masco (NYSE:MAS) sheds 3.1% this week, as yearly returns fall more in line with earnings growth

The main point of investing for the long term is to make money. Furthermore, you'd generally like to see the share price rise faster than the market. Unfortunately for shareholders, while the Masco Corporation (NYSE:MAS) share price is up 70% in the last five years, that's less than the market return. Some buyers are laughing, though, with an increase of 30% in the last year.

Since the long term performance has been good but there's been a recent pullback of 3.1%, let's check if the fundamentals match the share price.

Check out our latest analysis for Masco

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 five years of share price growth, Masco achieved compound earnings per share (EPS) growth of 14% per year. This EPS growth is higher than the 11% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

Dive deeper into Masco's key metrics by checking this interactive graph of Masco's earnings, revenue and cash flow.

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 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. In the case of Masco, it has a TSR of 85% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Masco's TSR for the year was broadly in line with the market average, at 33%. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 13%. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. It's always interesting to track share price performance over the longer term. But to understand Masco better, we need to consider many other factors. Even so, be aware that Masco is showing 2 warning signs in our investment analysis , you should know about...

Of course Masco 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 American 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.