Investors who have held Alten (EPA:ATE) over the last year have watched its earnings decline along with their investment

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. Investors in Alten S.A. (EPA:ATE) have tasted that bitter downside in the last year, as the share price dropped 22%. That's disappointing when you consider the market declined 1.2%. However, the longer term returns haven't been so bad, with the stock down 4.1% in the last three years. The falls have accelerated recently, with the share price down 17% in the last three months.

Although the past week has been more reassuring for shareholders, they're still in the red over the last year, so let's see if the underlying business has been responsible for the decline.

View our latest analysis for Alten

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Unhappily, Alten had to report a 49% decline in EPS over the last year. The share price fall of 22% isn't as bad as the reduction in earnings per share. So despite the weak per-share profits, some investors are probably relieved the situation wasn't more difficult.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

While the broader market gained around 1.2% in the last year, Alten shareholders lost 21% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 0.4%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Alten , and understanding them should be part of your investment process.

But note: Alten may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on French exchanges.

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

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