Statistically speaking, long term investing is a profitable endeavour. But along the way some stocks are going to perform badly. To wit, the National Research Corporation (NASDAQ:NRC) share price managed to fall 72% over five long years. That's not a lot of fun for true believers. And we doubt long term believers are the only worried holders, since the stock price has declined 62% over the last twelve months. Shareholders have had an even rougher run lately, with the share price down 20% in the last 90 days.

After losing 12% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

See our latest analysis for National Research

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the five years over which the share price declined, National Research's earnings per share (EPS) dropped by 3.8% each year. This reduction in EPS is less than the 23% annual reduction in the share price. This implies that the market was previously too optimistic about the stock.

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

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. 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. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, National Research's TSR for the last 5 years was -70%, 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 National Research had a tough year, with a total loss of 61% (including dividends), against a market gain of about 20%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 11% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand National Research better, we need to consider many other factors. For instance, we've identified 3 warning signs for National Research (1 shouldn't be ignored) that you should be aware of.

We will like National Research better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.