Earnings growth of 7.3% over 3 years hasn't been enough to translate into positive returns for Impax Asset Management Group (LON:IPX) shareholders

If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. Long term Impax Asset Management Group Plc (LON:IPX) shareholders know that all too well, since the share price is down considerably over three years. Sadly for them, the share price is down 73% in that time. And more recent buyers are having a tough time too, with a drop of 31% in the last year. Shareholders have had an even rougher run lately, with the share price down 22% in the last 90 days.

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

View our latest analysis for Impax Asset Management Group

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 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).

Although the share price is down over three years, Impax Asset Management Group actually managed to grow EPS by 23% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.

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.

Given the healthiness of the dividend payments, we doubt that they've concerned the market. We like that Impax Asset Management Group has actually grown its revenue over the last three years. But it's not clear to us why the share price is down. It might be worth diving deeper into the fundamentals, lest an opportunity goes begging.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Impax Asset Management Group the TSR over the last 3 years was -69%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Impax Asset Management Group shareholders are down 27% for the year (even including dividends), but the market itself is up 9.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 11% 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. It's always interesting to track share price performance over the longer term. But to understand Impax Asset Management Group better, we need to consider many other factors. For example, we've discovered 2 warning signs for Impax Asset Management Group that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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