While it may not be enough for some shareholders, we think it is good to see the Valhi, Inc. (NYSE:VHI) share price up 20% in a single quarter. But over the last half decade, the stock has not performed well. After all, the share price is down 41% in that time, significantly under-performing the market.

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.

See our latest analysis for Valhi

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 five years over which the share price declined, Valhi's earnings per share (EPS) dropped by 68% each year. This was, in part, due to extraordinary items impacting earnings. The share price decline of 10% per year isn't as bad as the EPS decline. So investors might expect EPS to bounce back -- or they may have previously foreseen the EPS decline. The high P/E ratio of 748.23 suggests that shareholders believe earnings will grow in the years ahead.

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

This free interactive report on Valhi's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Valhi the TSR over the last 5 years was -34%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Valhi shareholders gained a total return of 20% during the year. But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 6% per year, over five years. It could well be that the business is stabilizing. It's always interesting to track share price performance over the longer term. But to understand Valhi better, we need to consider many other factors. Case in point: We've spotted 4 warning signs for Valhi you should be aware of, and 1 of them shouldn't be ignored.

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.