The one-year loss for Genomma Lab Internacional. de (BMV:LABB) shareholders likely driven by its shrinking earnings

It's easy to match the overall market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Unfortunately the Genomma Lab Internacional, S.A.B. de C.V. (BMV:LABB) share price slid 31% over twelve months. That contrasts poorly with the market return of 25%. On the other hand, the stock is actually up 13% over three years. Shareholders have had an even rougher run lately, with the share price down 16% in the last 90 days.

On a more encouraging note the company has added Mex$1.0b to its market cap in just the last 7 days, so let's see if we can determine what's driven the one-year loss for shareholders.

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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 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.

Unfortunately Genomma Lab Internacional. de reported an EPS drop of 6.1% for the last year. This reduction in EPS is not as bad as the 31% share price fall. This suggests the EPS fall has made some shareholders more nervous about the business. The P/E ratio of 11.09 also points to the negative market sentiment.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Dive deeper into Genomma Lab Internacional. de's key metrics by checking this interactive graph of Genomma Lab Internacional. de's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Genomma Lab Internacional. de's TSR for the last 1 year was -28%, 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

While the broader market gained around 25% in the last year, Genomma Lab Internacional. de shareholders lost 28% (even including dividends). 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. On the bright side, long term shareholders have made money, with a gain of 3% per year over half a decade. 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. 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. For example, we've discovered 1 warning sign for Genomma Lab Internacional. de that you should be aware of before investing here.

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 Mexican 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.