Many investors define successful investing as outperforming the market average over the long term. But it is almost certain that you will sometimes buy stocks that are below average market returns. We regret to report that long-term Pfizer Inc. (NYSE:PFE) shareholders have had this experience, with the share price falling 41% in three years while the market returned about 14%. In the last week, the share price slipped another 6.2%. Importantly, this could be a market reaction to the recently released financial results. For the latest numbers, check out our company report.

With the stock down 6.2% over the past week, it’s worth taking a look at business trends and checking for any warning signs.

Check out our latest analysis for Pfizer

To paraphrase Benjamin Graham, in the short term, the market is a voting machine, but in the long term, it is a weighing machine. A flawed but reasonable way to assess how sentiment toward a company has changed is to compare earnings per share (EPS) to the stock price.

Pfizer saw its share price decline and end up in a loss over the three years in which its earnings per share also declined. This was partly due to extraordinary items that affected earnings. Since the company slipped into a loss, it is difficult to compare the change in earnings per share with the change in the share price. However, we can say that in this scenario, we would expect the share price to fall.

The company’s earnings per share (over time) is shown in the image below (click to see the exact numbers).

Before buying or selling a stock, we always recommend a close examination of the historical growth trends. You can find them here.

What about dividends?

In addition to measuring the share price return, investors should also consider the total shareholder return (TSR). While 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 dividend-paying stocks. We note that the TSR for Pfizer over the last 3 years was -33%, which is better than the share price return mentioned above. This is largely due to the dividend payments!

A different perspective

While the broader market gained around 19% over the past year, Pfizer shareholders lost 16% (even including dividends). However, keep in mind that even the best stocks sometimes underperform the market over a twelve-month period. Long-term investors would not be so upset, having earned 1.4% each year over five years. If fundamentals continue to point to long-term, sustainable growth, the current sell-off could be an opportunity worth considering. While it’s worth considering the varying impacts of market conditions on the share price, there are other factors that are even more important. To that end, you should be aware of the following: 2 warning signs we discovered it at Pfizer.

The story continues

Naturally, If you look elsewhere, you may find a fantastic investment. So take a look at the free List of companies we expect to grow their earnings.

Please note that the market returns quoted in this article reflect the market weighted average returns of stocks currently trading on U.S. exchanges.

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This Simply Wall St article is of a general nature. We comment solely on the basis of historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.