While not a mind-blowing move, it is good to see that the Avista Corporation (NYSE:AVA) share price has gained 12% in the last three months. But if you look at the last five years the returns have not been good. In fact, the share price is down 21%, which falls well short of the return you could get by buying an index fund.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for Avista

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the five years over which the share price declined, Avista's earnings per share (EPS) dropped by 3.9% each year. Notably, the share price has fallen at 5% per year, fairly close to the change in the EPS. This implies that the market has had a fairly steady view of the stock. So it's fair to say the share price has been responding to changes in EPS.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Avista has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Avista's TSR for the last 5 years was -1.5%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Avista shareholders are up 26% for the year (even including dividends). But that return falls short of the market. But at least that's still a gain! Over five years the TSR has been a reduction of 0.3% per year, over five years. It could well be that the business is stabilizing. 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 - Avista has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

Of course Avista 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.