Investors three-year losses continue as Relaxo Footwears (NSE:RELAXO) dips a further 4.4% this week, earnings continue to decline

Many investors define successful investing as beating the market average over the long term. But if you try your hand at stock picking, you risk returning less than the market. Unfortunately, that's been the case for longer term Relaxo Footwears Limited (NSE:RELAXO) shareholders, since the share price is down 49% in the last three years, falling well short of the market return of around 67%. And the ride hasn't got any smoother in recent times over the last year, with the price 28% lower in that time. Furthermore, it's down 22% in about a quarter. That's not much fun for holders.

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

Check out our latest analysis for Relaxo Footwears

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.

Relaxo Footwears saw its EPS decline at a compound rate of 15% per year, over the last three years. The share price decline of 20% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy. Of course, with a P/E ratio of 90.00, the market remains optimistic.

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

This free interactive report on Relaxo Footwears' 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 gained around 28% in the last year, Relaxo Footwears shareholders lost 28% (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 1.7%, each year, over five years. 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. 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. For instance, we've identified 1 warning sign for Relaxo Footwears that you should be aware of.

Of course Relaxo Footwears 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 Indian 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.