Himax Technologies, Inc. (NASDAQ:HIMX) shareholders have seen the share price descend 18% over the month. But that doesn't change the fact that shareholders have received really good returns over the last five years. In fact, the share price is 167% higher today. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Of course, that doesn't necessarily mean it's cheap now. Unfortunately not all shareholders will have held it for five years, so spare a thought for those caught in the 53% decline over the last three years: that's a long time to wait for profits.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Over half a decade, Himax Technologies managed to grow its earnings per share at 110% a year. This EPS growth is higher than the 22% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.

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 Himax Technologies has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Himax Technologies will grow revenue in the future.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Himax Technologies, it has a TSR of 249% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Investors in Himax Technologies had a tough year, with a total loss of 2.7% (including dividends), against a market gain of about 23%. 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. On the bright side, long term shareholders have made money, with a gain of 28% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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 1 warning sign for Himax Technologies you should be aware of.

We will like Himax Technologies better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider 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.