Starbucks Corporation (NASDAQ:SBUX) shareholders should be happy to see the share price up 27% in the last quarter. But that cannot eclipse the less-than-impressive returns over the last three years. Truth be told the share price declined 13% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Although the share price is down over three years, Starbucks actually managed to grow EPS by 14% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.

It is a little bizarre to see the share price down, despite a strong improvement to earnings per share. So we'll have to take a look at other metrics to try to understand the price action.

Revenue is actually up 9.4% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating Starbucks further; while we may be missing something on this analysis, there might also be an opportunity.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Starbucks is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Starbucks in this interactive graph of future profit estimates.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. As it happens, Starbucks' TSR for the last 3 years was -7.0%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Starbucks shareholders are up 6.7% for the year (even including dividends). But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 4% per year over five year. It is possible that returns will improve along with the business fundamentals. It's always interesting to track share price performance over the longer term. But to understand Starbucks better, we need to consider many other factors. Take risks, for example - Starbucks has 2 warning signs (and 1 which doesn't sit too well with us) we think 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.