In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But in any portfolio, there will be mixed results between individual stocks. At this point some shareholders may be questioning their investment in Maxis Berhad (KLSE:MAXIS), since the last five years saw the share price fall 35%.

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.

View our latest analysis for Maxis Berhad

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, Maxis Berhad's earnings per share (EPS) dropped by 11% each year. The share price decline of 8% per year isn't as bad as the EPS decline. The relatively muted share price reaction might be because the market expects the business to turn around.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Maxis Berhad's TSR for the last 5 years was -20%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Investors in Maxis Berhad had a tough year, with a total loss of 8.2% (including dividends), against a market gain of about 16%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4% 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. 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. Even so, be aware that Maxis Berhad is showing 2 warning signs in our investment analysis , you should know about...