Investors three-year losses continue as Salvatore Ferragamo (BIT:SFER) dips a further 4.2% this week, earnings continue to decline

If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But the last three years have been particularly tough on longer term Salvatore Ferragamo S.p.A. (BIT:SFER) shareholders. So they might be feeling emotional about the 62% share price collapse, in that time. And over the last year the share price fell 45%, so we doubt many shareholders are delighted. The falls have accelerated recently, with the share price down 22% in the last three months.

With the stock having lost 4.2% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for Salvatore Ferragamo

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).

During the three years that the share price fell, Salvatore Ferragamo's earnings per share (EPS) dropped by 42% each year. This fall in the EPS is worse than the 28% compound annual share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in. With a P/E ratio of 119.14, it's fair to say the market sees a brighter future for the business.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It might be well worthwhile taking a look at our free report on Salvatore Ferragamo's earnings, revenue and cash flow.

A Different Perspective

Salvatore Ferragamo shareholders are down 44% for the year (even including dividends), but the market itself is up 23%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 9% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Even so, be aware that Salvatore Ferragamo is showing 3 warning signs in our investment analysis , you should know about...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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