Soitec's (EPA:SOI) earnings have declined over three years, contributing to shareholders 69% loss

The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the last three years have been particularly tough on longer term Soitec SA (EPA:SOI) shareholders. Sadly for them, the share price is down 69% in that time. And the ride hasn't got any smoother in recent times over the last year, with the price 48% lower in that time. Furthermore, it's down 44% in about a quarter. That's not much fun for holders.

On a more encouraging note the company has added €73m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

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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. 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.

Soitec saw its EPS decline at a compound rate of 6.3% per year, over the last three years. The share price decline of 32% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past.

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 Soitec's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market lost about 5.4% in the twelve months, Soitec shareholders did even worse, losing 48%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 8% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. To that end, you should be aware of the 2 warning signs we've spotted with Soitec .

Of course Soitec may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.