Many investors define successful investing as beating the market average over the long term. But if you try your hand at stock picking, your risk returning less than the market. We regret to report that long term Northern Trust Corporation (NASDAQ:NTRS) shareholders have had that experience, with the share price dropping 25% in three years, versus a market return of about 14%.

Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.

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 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.

Northern Trust saw its EPS decline at a compound rate of 6.7% per year, over the last three years. The share price decline of 9% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past.

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

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on Northern Trust'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. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Northern Trust the TSR over the last 3 years was -17%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Northern Trust provided a TSR of 14% over the last twelve months. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 0.2% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.