The three-year loss for Cembra Money Bank (VTX:CMBN) shareholders likely driven by its shrinking earnings

As an investor its worth striving to ensure your overall portfolio beats the market average. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term Cembra Money Bank AG (VTX:CMBN) shareholders, since the share price is down 28% in the last three years, falling well short of the market return of around 12%.

On a more encouraging note the company has added CHF89m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

See our latest analysis for Cembra Money Bank

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the three years that the share price fell, Cembra Money Bank's earnings per share (EPS) dropped by 0.2% each year. This reduction in EPS is slower than the 11% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

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

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Cembra Money Bank's TSR for the last 3 years was -17%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While the broader market gained around 2.4% in the last year, Cembra Money Bank shareholders lost 9.1% (even including dividends). 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 1.2% 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. Before forming an opinion on Cembra Money Bank you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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