Rand Merchant Investment Holdings' (JSE:RMI) investors will be pleased with their favorable 43% return over the last five years

Ideally, your overall portfolio should beat the market average. A talented investor can beat the market with a diversified portfolio, but even then, some stocks will under-perform. While the Rand Merchant Investment Holdings Limited (JSE:RMI) share price is down 38% over half a decade, the total return to shareholders (which includes dividends) was 43%. And that total return actually beats the market decline of 32%. It's down 46% in about a month.

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.

See our latest analysis for Rand Merchant Investment Holdings

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 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, Rand Merchant Investment Holdings' earnings per share (EPS) dropped by 6.8% 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. So it seems the market was too confident about the business, in the past.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Rand Merchant Investment Holdings has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Rand Merchant Investment Holdings will grow revenue in the future.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Rand Merchant Investment Holdings the TSR over the last 5 years was 43%, 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

We're pleased to report that Rand Merchant Investment Holdings shareholders have received a total shareholder return of 71% over one year. Of course, that includes the dividend. That's better than the annualised return of 7% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Rand Merchant Investment Holdings you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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