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 Ziff Davis, Inc. (NASDAQ:ZD) shareholders, since the share price is down 55% in the last three years, falling well short of the market return of around 20%. Furthermore, it's down 19% in about a quarter. That's not much fun for holders. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.

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.

During the three years that the share price fell, Ziff Davis' earnings per share (EPS) dropped by 7.2% each year. The share price decline of 24% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of Ziff Davis' earnings, revenue and cash flow.

What About The Total Shareholder Return (TSR)?

We've already covered Ziff Davis' share price action, but we should also mention its total shareholder return (TSR). 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. Dividends have been really beneficial for Ziff Davis shareholders, and that cash payout explains why its total shareholder loss of 49%, over the last 3 years, isn't as bad as the share price return.

A Different Perspective

Investors in Ziff Davis had a tough year, with a total loss of 8.4%, against a market gain of about 28%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4% over the last half decade. 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 Ziff Davis better, we need to consider many other factors. For instance, we've identified 2 warning signs for Ziff Davis that you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).

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.