We think intelligent long term investing is the way to go. But no-one is immune from buying too high. For example the Territorial Bancorp Inc. (NASDAQ:TBNK) share price dropped 71% over five years. We certainly feel for shareholders who bought near the top. And we doubt long term believers are the only worried holders, since the stock price has declined 60% over the last twelve months. Shareholders have had an even rougher run lately, with the share price down 43% in the last 90 days.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

See our latest analysis for Territorial Bancorp

There is no denying that markets are sometimes efficient, but prices do not always reflect 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.

During the five years over which the share price declined, Territorial Bancorp's earnings per share (EPS) dropped by 5.7% each year. Readers should note that the share price has fallen faster than the EPS, at a rate of 22% per year, over the period. So it seems the market was too confident about the business, in the past. The less favorable sentiment is reflected in its current P/E ratio of 6.09.

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

It might be well worthwhile taking a look at our free report on Territorial Bancorp's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Territorial Bancorp the TSR over the last 5 years was -64%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market gained around 12% in the last year, Territorial Bancorp shareholders lost 57% (even including dividends). 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 10% 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. It's always interesting to track share price performance over the longer term. But to understand Territorial Bancorp better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Territorial Bancorp (at least 1 which is potentially serious) , and understanding them should be part of your investment process.