The three-year decline in earnings might be taking its toll on Misto Holdings (KRX:081660) shareholders as stock falls 4.0% over the past week

Buying a low-cost index fund will get you the average market return. But in any diversified portfolio of stocks, you'll see some that fall short of the average. That's what has happened with the Misto Holdings Corp. (KRX:081660) share price. It's up 21% over three years, but that is below the market return. Disappointingly, the share price is down 16% in the last year.

In light of the stock dropping 4.0% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive three-year return.

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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Over the last three years, Misto Holdings failed to grow earnings per share, which fell 24% (annualized).

This means it's unlikely the market is judging the company based on earnings growth. Given this situation, it makes sense to look at other metrics too.

We severely doubt anyone is particularly impressed with the modest 1.5% three-year revenue growth rate. While we don't have an obvious theory to explain the share price rise, a closer look at the data might be enlightening.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We know that Misto Holdings has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Misto Holdings will earn in the future (free profit forecasts).

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Misto Holdings' TSR for the last 3 years was 35%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Misto Holdings shareholders are down 13% for the year (even including dividends), but the market itself is up 17%. 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 4%, 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. Even so, be aware that Misto Holdings is showing 1 warning sign in our investment analysis , you should know about...

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