Generally speaking long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. For example the Humm Group Limited (ASX:HUM) share price dropped 70% over five years. That's an unpleasant experience for long term holders. The falls have accelerated recently, with the share price down 25% in the last three months.

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.

Check out our latest analysis for Humm Group

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 five years of share price growth, Humm Group moved from a loss to profitability. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics may better explain the share price move.

It could be that the revenue decline of 3.0% per year is viewed as evidence that Humm Group is shrinking. That could explain the weak share price.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We know that Humm Group has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Humm Group will earn in the future (free profit forecasts).

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Humm Group's TSR for the last 5 years was -64%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Humm Group has rewarded shareholders with a total shareholder return of 14% in the last twelve months. Of course, that includes the dividend. Notably the five-year annualised TSR loss of 10% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand Humm Group better, we need to consider many other factors. Take risks, for example - Humm Group has 3 warning signs (and 2 which make us uncomfortable) we think you should know about.

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 Australian 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.