When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Furthermore, you'd generally like to see the share price rise faster than the market. Unfortunately for shareholders, while the Mattel, Inc. (NASDAQ:MAT) share price is up 41% in the last five years, that's less than the market return. The last year has been disappointing, with the stock price down 23% in that time.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the five years of share price growth, Mattel moved from a loss to profitability. That's generally thought to be a genuine positive, so investors may expect to see an increasing share price. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. In fact, the Mattel stock price is 14% lower in the last three years. During the same period, EPS grew by 11% each year. It would appear there's a real mismatch between the increasing EPS and the share price, which has declined -5% a year for three years.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Mattel has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

A Different Perspective

Investors in Mattel had a tough year, with a total loss of 23%, against a market gain of about 24%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 7%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Case in point: We've spotted 2 warning signs for Mattel you should be aware of.

Of course Mattel may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com