Investors three-year losses continue as Herige (EPA:ALHRG) dips a further 10% this week, earnings continue to decline

Many investors define successful investing as beating the market average over the long term. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Herige (EPA:ALHRG) shareholders have had that experience, with the share price dropping 49% in three years, versus a market return of about 8.2%. And over the last year the share price fell 35%, so we doubt many shareholders are delighted. Furthermore, it's down 18% in about a quarter. That's not much fun for holders. However, one could argue that the price has been influenced by the general market, which is down 7.8% in the same timeframe.

After losing 10% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

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

Herige saw its EPS decline at a compound rate of 17% per year, over the last three years. This change in EPS is reasonably close to the 20% average annual decrease in the share price. That suggests that the market sentiment around the company hasn't changed much over that time, despite the disappointment. It seems like the share price is reflecting the declining earnings per share.

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

We know that Herige has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Herige will grow revenue in the future.

What About The Total Shareholder Return (TSR)?

We've already covered Herige'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. Herige's TSR of was a loss of 41% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

While the broader market lost about 12% in the twelve months, Herige shareholders did even worse, losing 31%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 2%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Herige better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Herige (at least 1 which is concerning) , and understanding them should be part of your investment process.

But note: Herige may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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