As an investor its worth striving to ensure your overall portfolio beats the market average. But the risk of stock picking is that you will likely buy under-performing companies. Unfortunately, that's been the case for longer term AVJennings Limited (ASX:AVJ) shareholders, since the share price is down 29% in the last three years, falling well short of the market return of around 21%. There was little comfort for shareholders in the last week as the price declined a further 1.9%.

View our latest analysis for AVJennings

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.

During the three years that the share price fell, AVJennings' earnings per share (EPS) dropped by 38% each year. This fall in the EPS is worse than the 11% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.

You can see below how EPS has changed over time (discover the exact values by clicking on the image). earnings-per-share-growth

It might be well worthwhile taking a look at our freereport on AVJennings' earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between AVJennings' total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that AVJennings' TSR, which was a 18% drop over the last 3 years, was not as bad as the share price return.

A Different Perspective

AVJennings shareholders are down 14% for the year, but the market itself is up 3.8%. 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 5%, 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. It's always interesting to track share price performance over the longer term. But to understand AVJennings better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted  2 warning signs for AVJennings  (of which 1 is significant!) you should know about.



If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this freelist of companies that have proven they can grow earnings.

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

This article by Simply Wall St is general in nature. 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.

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