The RMR Group Inc. (NASDAQ:RMR) shareholders should be happy to see the share price up 10% in the last month. But if you look at the last five years the returns have not been good. You would have done a lot better buying an index fund, since the stock has dropped 49% in that half decade.

Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

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

Looking back five years, both RMR Group's share price and EPS declined; the latter at a rate of 8.6% per year. This reduction in EPS is less than the 13% annual reduction in the share price. This implies that the market is more cautious about the business these days.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

As well as measuring the share price return, investors should also consider the 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for RMR Group the TSR over the last 5 years was -18%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

RMR Group shareholders are down 25% for the year (even including dividends), but the market itself is up 14%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 3% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - RMR Group has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.