Despite shrinking by US$152m in the past week, Spectrum Brands Holdings (NYSE:SPB) shareholders are still up 60% over 5 years

The main point of investing for the long term is to make money. Better yet, you'd like to see the share price move up more than the market average. But Spectrum Brands Holdings, Inc. (NYSE:SPB) has fallen short of that second goal, with a share price rise of 42% over five years, which is below the market return. Over the last twelve months the stock price has risen a very respectable 14%.

While the stock has fallen 5.6% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

View our latest analysis for Spectrum Brands Holdings

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 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 of share price growth, Spectrum Brands Holdings moved from a loss to profitability. That's generally thought to be a genuine positive, so investors may expect to see an increasing share price. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the Spectrum Brands Holdings share price is down 4.9% in the last three years. In the same period, EPS is up 116% per year. It would appear there's a real mismatch between the increasing EPS and the share price, which has declined -1.7% a year for three years.

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

It is of course excellent to see how Spectrum Brands Holdings has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

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 Spectrum Brands Holdings the TSR over the last 5 years was 60%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Spectrum Brands Holdings shareholders are up 16% for the year (even including dividends). Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 10% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with Spectrum Brands Holdings .

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.