Shareholders 47% loss in LEM Holding (VTX:LEHN) partly attributable to the company's decline in earnings over past three years

It is a pleasure to report that the LEM Holding SA (VTX:LEHN) is up 46% in the last quarter. But that doesn't help the fact that the three year return is less impressive. After all, the share price is down 50% in the last three years, significantly under-performing the market.

The recent uptick of 4.4% could be a positive sign of things to come, so let's take a look at historical fundamentals.

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

LEM Holding saw its EPS decline at a compound rate of 51% per year, over the last three years. This fall in the EPS is worse than the 21% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines. With a P/E ratio of 116.41, it's fair to say the market sees a brighter future for the business.

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

Dive deeper into LEM Holding's key metrics by checking this interactive graph of LEM Holding's earnings, revenue and cash flow.

What About The Total Shareholder Return (TSR)?

We've already covered LEM Holding's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that LEM Holding's TSR, which was a 47% drop over the last 3 years, was not as bad as the share price return.

A Different Perspective

LEM Holding shareholders are down 39% for the year, but the market itself is up 3.6%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5% 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 LEM Holding better, we need to consider many other factors. For instance, we've identified 3 warning signs for LEM Holding that you should be aware of.

We will like LEM Holding better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.