Investors three-year losses continue as OFX Group (ASX:OFX) dips a further 12% this week, earnings continue to decline

As every investor would know, not every swing hits the sweet spot. But you have a problem if you face massive losses more than once in a while. So consider, for a moment, the misfortune of OFX Group Limited (ASX:OFX) investors who have held the stock for three years as it declined a whopping 79%. That would certainly shake our confidence in the decision to own the stock. And the ride hasn't got any smoother in recent times over the last year, with the price 64% lower in that time. The falls have accelerated recently, with the share price down 38% in the last three months.

With the stock having lost 12% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

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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.

During the three years that the share price fell, OFX Group's earnings per share (EPS) dropped by 16% each year. The share price decline of 41% is actually steeper than the EPS slippage. 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 6.87.

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. This free interactive report on OFX Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

OFX Group shareholders are down 64% for the year, but the market itself is up 10.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 10% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. To that end, you should be aware of the 3 warning signs we've spotted with OFX Group .

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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.