Many investors define successful investing as beating the market average over the long term. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that's been the case for longer term Dana Incorporated (NYSE:DAN) shareholders, since the share price is down 50% in the last three years, falling well short of the market return of around 19%. The more recent news is of little comfort, with the share price down 28% in a year. More recently, the share price has dropped a further 13% in a month.

If the past week is anything to go by, investor sentiment for Dana isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

Given that Dana only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.

In the last three years, Dana saw its revenue grow by 10% per year, compound. That's a pretty good rate of top-line growth. That contrasts with the weak share price, which has fallen 15% compounded, over three years. The market must have had really high expectations to be disappointed with this progress. So this is one stock that might be worth investigating further, or even adding to your watchlist.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We know that Dana has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on Dana

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Dana, it has a TSR of -46% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Investors in Dana had a tough year, with a total loss of 26% (including dividends), against a market gain of about 25%. 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 6% 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 - Dana has 3 warning signs (and 1 which is potentially serious) we think you should know about.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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