The five-year shareholder returns and company earnings persist lower as Eutelsat Group (EPA:ETL) stock falls a further 3.2% in past week

We think intelligent long term investing is the way to go. But no-one is immune from buying too high. For example the Eutelsat Group (EPA:ETL) share price dropped 78% over five years. We certainly feel for shareholders who bought near the top. And it's not just long term holders hurting, because the stock is down 38% in the last year. Unfortunately the share price momentum is still quite negative, with prices down 16% in thirty days. But this could be related to poor market conditions -- stocks are down 6.6% in the same time.

If the past week is anything to go by, investor sentiment for Eutelsat Group isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for Eutelsat Group

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.

During the five years over which the share price declined, Eutelsat Group's earnings per share (EPS) dropped by 34% each year. The share price decline of 26% per year isn't as bad as the EPS decline. The relatively muted share price reaction might be because the market expects the business to turn around.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Eutelsat Group's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Eutelsat Group's TSR of was a loss of 69% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

While the broader market gained around 1.0% in the last year, Eutelsat Group shareholders lost 38%. 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 11% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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 5 warning signs for Eutelsat Group you should be aware of, and 2 of them are potentially serious.

We will like Eutelsat Group better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com