Optimism around Euroz Hartleys Group (ASX:EZL) delivering new earnings growth may be shrinking as stock declines 11% this past week

Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Investors in Euroz Hartleys Group Limited (ASX:EZL) have tasted that bitter downside in the last year, as the share price dropped 47%. That's disappointing when you consider the market returned 7.8%. However, the longer term returns haven't been so bad, with the stock down 25% in the last three years. Furthermore, it's down 14% in about a quarter. That's not much fun for holders.

Since Euroz Hartleys Group has shed AU$20m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for Euroz Hartleys Group

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

Unfortunately Euroz Hartleys Group reported an EPS drop of 61% for the last year. The share price fall of 47% isn't as bad as the reduction in earnings per share. So the market may not be too worried about the EPS figure, at the moment -- or it may have expected earnings to drop faster.

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

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

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. We note that for Euroz Hartleys Group the TSR over the last 1 year was -26%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Euroz Hartleys Group shareholders are down 26% for the year (even including dividends), but the market itself is up 7.8%. 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 5% 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. It's always interesting to track share price performance over the longer term. But to understand Euroz Hartleys Group better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Euroz Hartleys Group (of which 2 are a bit unpleasant!) you should know about.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies 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 Australian 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.