We believe investing is smart because history shows that stock markets go higher in the long term. But if you choose that path, you're going to buy some stocks that fall short of the market. Over the last year the Cathay General Bancorp (NASDAQ:CATY) share price is up 24%, but that's less than the broader market return. However, the stock hasn't done so well in the longer term, with the stock only up 1.3% in three years.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

See our latest analysis for Cathay General Bancorp

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Over the last twelve months, Cathay General Bancorp actually shrank its EPS by 21%.

So we don't think that investors are paying too much attention to EPS. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.

Unfortunately Cathay General Bancorp's fell 9.5% over twelve months. So the fundamental metrics don't provide an obvious explanation for the share price gain.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. You can see what analysts are predicting for Cathay General Bancorp in this interactive graph of future profit estimates.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Cathay General Bancorp's TSR for the last 1 year was 29%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Cathay General Bancorp shareholders are up 29% for the year (even including dividends). But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 8% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. It's always interesting to track share price performance over the longer term. But to understand Cathay General Bancorp better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Cathay General Bancorp (of which 1 is a bit unpleasant!) you should know about.