As an investor its worth striving to ensure your overall portfolio beats the market average. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term Levi Strauss & Co. (NYSE:LEVI) shareholders have had that experience, with the share price dropping 12% in three years, versus a market return of about 38%. More recently, the share price has dropped a further 11% in a month.

Since Levi Strauss has shed US$439m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Levi Strauss

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Levi Strauss saw its EPS decline at a compound rate of 27% per year, over the last three years. This fall in the EPS is worse than the 4% compound annual share price fall. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term.

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

Dive deeper into Levi Strauss' key metrics by checking this interactive graph of Levi Strauss's earnings, revenue and cash flow.

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. We note that for Levi Strauss the TSR over the last 3 years was -3.7%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market gained around 16% in the last year, Levi Strauss shareholders lost 6.4% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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 Levi Strauss is showing 2 warning signs in our investment analysis , you should know about...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.