The past one-year earnings decline for JD Sports Fashion (LON:JD.) likely explains shareholders long-term losses

It's easy to match the overall market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Unfortunately the JD Sports Fashion Plc (LON:JD.) share price slid 35% over twelve months. That's well below the market decline of 1.3%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 26% in three years. Shareholders have had an even rougher run lately, with the share price down 28% in the last 90 days.

The recent uptick of 3.3% could be a positive sign of things to come, so let's take a look at historical fundamentals.

View our latest analysis for JD Sports Fashion

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Unfortunately JD Sports Fashion reported an EPS drop of 39% for the last year. This proportional reduction in earnings per share isn't far from the 35% decrease in the share price. Therefore one could posit that the market has not become more concerned about the company, despite the lower EPS. Rather, the share price is remains a similar multiple of the EPS, suggesting the outlook remains the same.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. It might be well worthwhile taking a look at our free report on JD Sports Fashion's earnings, revenue and cash flow.

A Different Perspective

We regret to report that JD Sports Fashion shareholders are down 34% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 1.3%. 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. Longer term investors wouldn't be so upset, since they would have made 5%, 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. To that end, you should be aware of the 3 warning signs we've spotted with JD Sports Fashion .

JD Sports Fashion is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.