Umicore (EBR:UMI) investors are sitting on a loss of 75% if they invested three years ago

As an investor, mistakes are inevitable. But you want to avoid the really big losses like the plague. So take a moment to sympathize with the long term shareholders of Umicore SA (EBR:UMI), who have seen the share price tank a massive 77% over a three year period. That would be a disturbing experience. The more recent news is of little comfort, with the share price down 55% in a year.

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.

View our latest analysis for Umicore

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.

Over the three years that the share price declined, Umicore's earnings per share (EPS) dropped significantly, falling to a loss. Extraordinary items contributed to this situation. Due to the loss, it's not easy to use EPS as a reliable guide to the business. However, we can say we'd expect to see a falling share price in this scenario.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

Umicore shareholders are down 54% for the year (even including dividends), but the market itself is up 8.4%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 11% per year over five years. 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. It's always interesting to track share price performance over the longer term. But to understand Umicore better, we need to consider many other factors. To that end, you should be aware of the 3 warning signs we've spotted with Umicore .

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Belgian 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.