The three-year underlying earnings growth at Vetoquinol (EPA:VETO) is promising, but the shareholders are still in the red over that time

As an investor its worth striving to ensure your overall portfolio beats the market average. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that's been the case for longer term Vetoquinol SA (EPA:VETO) shareholders, since the share price is down 45% in the last three years, falling well short of the market return of around 11%. The falls have accelerated recently, with the share price down 20% in the last three months.

After losing 5.5% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

Check out our latest analysis for Vetoquinol

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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, Vetoquinol actually saw its earnings per share (EPS) improve by 5.3% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

With a rather small yield of just 1.0% we doubt that the stock's share price is based on its dividend. The company has kept revenue pretty healthy over the last three years, so we doubt that explains the falling share price. We're not entirely sure why the share price is dropped, but it does seem likely investors have become less optimistic about the business.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

If you are thinking of buying or selling Vetoquinol stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Vetoquinol shareholders gained a total return of 1.8% during the year. But that was short of the market average. On the bright side, the longer term returns (running at about 8% a year, over half a decade) look better. Maybe the share price is just taking a breather while the business executes on its growth strategy. Is Vetoquinol cheap compared to other companies? These 3 valuation measures might help you decide.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.