Earnings growth of 3.9% over 3 years hasn't been enough to translate into positive returns for Manitou BF (EPA:MTU) shareholders

For many investors, the main point of stock picking is to generate higher returns than the overall market. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Manitou BF SA (EPA:MTU) shareholders have had that experience, with the share price dropping 30% in three years, versus a market return of about 19%. And over the last year the share price fell 29%, so we doubt many shareholders are delighted. Even worse, it's down 21% in about a month, which isn't fun at all. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

With the stock having lost 7.3% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

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In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 unfortunate three years of share price decline, Manitou BF actually saw its earnings per share (EPS) improve by 12% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

We note that the dividend seems healthy enough, so that probably doesn't explain the share price drop. It's good to see that Manitou BF has increased its revenue over the last three years. But it's not clear to us why the share price is down. It might be worth diving deeper into the fundamentals, lest an opportunity goes begging.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

We know that Manitou BF has improved its bottom line lately, but what does the future have in store? So we recommend checking out this free report showing consensus forecasts

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Manitou BF the TSR over the last 3 years was -20%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

While the broader market lost about 2.1% in the twelve months, Manitou BF shareholders did even worse, losing 25% (even including dividends). 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. On the bright side, long term shareholders have made money, with a gain of 8% per year over half a decade. 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 Manitou BF better, we need to consider many other factors. For instance, we've identified 3 warning signs for Manitou BF (1 can't be ignored) that you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.