Sodexo (EPA:SW) earnings and shareholder returns have been trending downwards for the last year, but the stock advances 3.2% this past week

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Investors in Sodexo S.A. (EPA:SW) have tasted that bitter downside in the last year, as the share price dropped 32%. That's disappointing when you consider the market declined 0.7%. At least the damage isn't so bad if you look at the last three years, since the stock is down 14% in that time. Shareholders have had an even rougher run lately, with the share price down 19% in the last 90 days.

On a more encouraging note the company has added €263m to its market cap in just the last 7 days, so let's see if we can determine what's driven the one-year loss for shareholders.

Our free stock report includes 2 warning signs investors should be aware of before investing in Sodexo. Read for free now.

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.

Unhappily, Sodexo had to report a 5.6% decline in EPS over the last year. This reduction in EPS is not as bad as the 32% share price fall. This suggests the EPS fall has made some shareholders more nervous about the business.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

This free interactive report on Sodexo's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Sodexo, it has a TSR of -24% for the last 1 year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We regret to report that Sodexo shareholders are down 24% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 0.7%. 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. On the bright side, long term shareholders have made money, with a gain of 9% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for Sodexo you should be aware of.

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 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.