Pulling back 5.0% this week, Metropolis Healthcare's NSE:METROPOLIS) three-year decline in earnings may be coming into investors focus

Vanguard founder Jack Bogle helped spearhead the low-cost index fund, putting average returns within reach of every investor. But you can make superior returns by picking better-than average stocks. For example, the Metropolis Healthcare Limited (NSE:METROPOLIS) share price is up 50% in the last three years, slightly above the market return. The bad news is that the share price seems to lack positive momentum recently, since it has dropped 2.4% in the last year.

While the stock has fallen 5.0% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

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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 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.

Over the last three years, Metropolis Healthcare failed to grow earnings per share, which fell 4.5% (annualized).

Companies are not always focussed on EPS growth in the short term, and looking at how the share price has reacted, we don't think EPS is the most important metric for Metropolis Healthcare at the moment. So other metrics may hold the key to understanding what is influencing investors.

It could be that the revenue growth of 6.0% per year is viewed as evidence that Metropolis Healthcare is growing. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder's faith in better days ahead will be rewarded.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Metropolis Healthcare is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Metropolis Healthcare stock, you should check out this free report showing analyst consensus estimates for future profits.

A Different Perspective

While it's certainly disappointing to see that Metropolis Healthcare shares lost 2.4% throughout the year, that wasn't as bad as the market loss of 3.4%. Longer term investors wouldn't be so upset, since they would have made 2%, each year, over five years. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. Before forming an opinion on Metropolis Healthcare you might want to consider these 3 valuation metrics.

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 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.