Statistically speaking, long-term investing is a profitable business. But along the way, some stocks will perform poorly. Namely, the Danske Bank A/S (CPH:DANSKE) the stock price managed to drop 57% over five long years. It’s an unpleasant experience for long-term holders.

It is worth assessing whether the economics of the company have evolved alongside these disappointing returns to shareholders, or whether there is some disparity between the two. So let’s just do that.

Check out our latest analysis for Danske Bank

While markets are a powerful pricing mechanism, stock prices reflect investor sentiment, not just underlying trading performance. By comparing earnings per share (EPS) and share price changes over time, we can get an idea of ​​how investors’ attitudes toward a company change over time.

Looking back five years, Danske Bank’s share price and EPS have both declined; the latter at a rate of 7.2% per annum. Readers should note that the stock price fell faster than EPS, at a rate of 16% per year, over the period. So it seems that the market was overconfident in the company in the past. The low P/E ratio of 7.49 further reflects this reluctance.

The company’s earnings per share (over time) is shown in the image below (click to see exact numbers).

It’s probably worth noting that the CEO is paid less than the median at companies of a similar size. But while it’s still worth checking out CEO compensation, the really important question is whether the company can increase its profits in the future. This free Danske Bank’s Interactive Earnings, Revenue and Cash Flow Report is a great place to start if you want to do more research on the stock.

What about dividends?

In addition to measuring share price performance, investors should also consider total shareholder return (TSR). TSR is a calculation of return that takes into account the value of cash dividends (assuming any dividends received have been reinvested) and the calculated value of all discounted capital raisings and spinoffs. Arguably, TSR gives a more complete picture of the return generated by a stock. We note that for Danske Bank the TSR over the last 5 years was -51%, which is better than the share price return mentioned above. The dividends paid by the company thus inflated the total return to shareholders.

A different perspective

Investors in Danske Bank had a difficult year, with a total loss of 3.5% (including dividends), against a market gain of around 2.2%. Even good stock prices sometimes drop, but we want to see improvements in a company’s fundamentals before we get too interested. Unfortunately, longer-term shareholders are suffering more, given the 9% loss distributed over the past five years. We would like clear information suggesting that the company will grow, before assuming that the share price will stabilize. I find it very interesting to look at stock price over the long term as a proxy for company performance. But to really get insight, we also need to consider other information. Even so, know that Danske Bank shows 1 warning sign in our investment analysis you should know…

We’ll like Danske Bank better if we see big insider buying. In the meantime, watch this free list of growing companies with significant and recent insider buying.

Please note that the market returns quoted in this article reflect the average market-weighted returns of stocks currently trading on DK exchanges.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.