The five-year shareholder returns and company earnings persist lower as Altria Group (NYSE:MO) stock falls a further 6.7% in past week

Ideally, your overall portfolio should beat the market average. But every investor is virtually certain to have both over-performing and under-performing stocks. So we wouldn't blame long term Altria Group, Inc. (NYSE:MO) shareholders for doubting their decision to hold, with the stock down 39% over a half decade. The falls have accelerated recently, with the share price down 13% in the last three months. But this could be related to the weak market, which is down 11% in the same period.

Since Altria Group has shed US$5.3b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Altria Group

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the five years over which the share price declined, Altria Group's earnings per share (EPS) dropped by 2.6% each year. Readers should note that the share price has fallen faster than the EPS, at a rate of 9% per year, over the period. This implies that the market is more cautious about the business these days. The low P/E ratio of 7.95 further reflects this reticence.

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

We know that Altria Group has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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 Altria Group, it has a TSR of -11% 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

Investors in Altria Group had a tough year, with a total loss of 7.6% (including dividends), against a market gain of about 6.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 2% per year over five years. 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. For instance, we've identified 1 warning sign for Altria Group that you should be aware of.

We will like Altria Group better if we see some big insider buys. While we wait, check out this free list of growing companies 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 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.