The main aim of stock picking is to find the market-beating stocks. But the main game is to find enough winners to more than offset the losers So we wouldn't blame long term Johnson Matthey Plc (LON:JMAT) shareholders for doubting their decision to hold, with the stock down 48% over a half decade.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for Johnson Matthey

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, Johnson Matthey's earnings per share (EPS) dropped by 22% each year. This fall in the EPS is worse than the 12% compound annual share price fall. The relatively muted share price reaction might be because the market expects the business to turn around.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It might be well worthwhile taking a look at our free report on Johnson Matthey's earnings, revenue and cash flow.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Johnson Matthey the TSR over the last 5 years was -38%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Johnson Matthey shareholders are up 5.4% for the year (even including dividends). But that return falls short of the market. But at least that's still a gain! Over five years the TSR has been a reduction of 7% per year, over five years. It could well be that the business is stabilizing. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should be aware of the 3 warning signs we've spotted with Johnson Matthey .

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 British 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.