Shareholders in Kojamo Oyj (HEL:KOJAMO) have lost 53%, as stock drops 3.3% this past week

Investing in stocks inevitably means buying into some companies that perform poorly. But the long term shareholders of Kojamo Oyj (HEL:KOJAMO) have had an unfortunate run in the last three years. Regrettably, they have had to cope with a 55% drop in the share price over that period. And more recent buyers are having a tough time too, with a drop of 22% in the last year. Shareholders have had an even rougher run lately, with the share price down 12% in the last 90 days. However, one could argue that the price has been influenced by the general market, which is down 5.0% in the same timeframe.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

See our latest analysis for Kojamo Oyj

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

We know that Kojamo Oyj has been profitable in the past. However, it made a loss in the last twelve months, suggesting profit may be an unreliable metric at this stage. Other metrics might give us a better handle on how its value is changing over time.

We note that, in three years, revenue has actually grown at a 5.7% annual rate, so that doesn't seem to be a reason to sell shares. This analysis is just perfunctory, but it might be worth researching Kojamo Oyj more closely, as sometimes stocks fall unfairly. This could present an opportunity.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Take a more thorough look at Kojamo Oyj's financial health with this free report on its balance sheet.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Kojamo Oyj's total shareholder return (TSR) and its share price change, which we've covered above. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Kojamo Oyj's TSR of was a loss of 53% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

We regret to report that Kojamo Oyj shareholders are down 22% for the year. Unfortunately, that's worse than the broader market decline of 1.1%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 6% 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. To that end, you should be aware of the 1 warning sign we've spotted with Kojamo Oyj .

For those who like to find winning investments this free list of undervalued 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 Finnish 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.