Even after rising 4.7% this past week, Solaria Energía y Medio Ambiente (BME:SLR) shareholders are still down 50% over the past three years

Solaria Energía y Medio Ambiente, S.A. (BME:SLR) shareholders will doubtless be very grateful to see the share price up 52% in the last month. But over the last three years we've seen a quite serious decline. Indeed, the share price is down a tragic 50% in the last three years. So the improvement may be a real relief to some. While many would remain nervous, there could be further gains if the business can put its best foot forward.

While the stock has risen 4.7% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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).

A Different Perspective

Investors in Solaria Energía y Medio Ambiente had a tough year, with a total loss of 13%, against a market gain of about 25%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% over the last half decade. 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. 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. Case in point: We've spotted 3 warning signs for Solaria Energía y Medio Ambiente you should be aware of, and 2 of them are significant.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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