Earnings growth of 31% over 1 year hasn't been enough to translate into positive returns for Mermeren Kombinat AD (ATH:MERKO) shareholders

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in Mermeren Kombinat AD (ATH:MERKO) have tasted that bitter downside in the last year, as the share price dropped 42%. That's disappointing when you consider the market returned 31%. To make matters worse, the returns over three years have also been really disappointing (the share price is 36% lower than three years ago). Shareholders have had an even rougher run lately, with the share price down 31% in the last 90 days.

After losing 11% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

View our latest analysis for Mermeren Kombinat AD

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).

Even though the Mermeren Kombinat AD share price is down over the year, its EPS actually improved. Of course, the situation might betray previous over-optimism about growth.

It's fair to say that the share price does not seem to be reflecting the EPS growth. So it's easy to justify a look at some other metrics.

Mermeren Kombinat AD's dividend seems healthy to us, so we doubt that the yield is a concern for the market. From what we can see, revenue is pretty flat, so that doesn't really explain the share price drop. Of course, it could simply be that it simply fell short of the market consensus expectations.

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

Take a more thorough look at Mermeren Kombinat AD's financial health with this free report on its balance sheet.

A Different Perspective

While the broader market gained around 31% in the last year, Mermeren Kombinat AD shareholders lost 42% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should learn about the 3 warning signs we've spotted with Mermeren Kombinat AD (including 2 which are significant) .

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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