a2 Milk (NZSE:ATM) earnings and shareholder returns have been trending downwards for the last five years, but the stock advances 4.0% this past week

Statistically speaking, long term investing is a profitable endeavour. But along the way some stocks are going to perform badly. To wit, the The a2 Milk Company Limited (NZSE:ATM) share price managed to fall 62% over five long years. That is extremely sub-optimal, to say the least. And some of the more recent buyers are probably worried, too, with the stock falling 37% in the last year.

The recent uptick of 4.0% could be a positive sign of things to come, so let's take a look at historical fundamentals.

Check out our latest analysis for a2 Milk

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.

During the five years over which the share price declined, a2 Milk's earnings per share (EPS) dropped by 4.4% each year. Readers should note that the share price has fallen faster than the EPS, at a rate of 18% per year, over the period. This implies that the market was previously too optimistic about the stock.

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

We know that a2 Milk has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

A Different Perspective

We regret to report that a2 Milk shareholders are down 37% for the year. Unfortunately, that's worse than the broader market decline of 0.1%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% 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. Is a2 Milk cheap compared to other companies? These 3 valuation measures might help you decide.

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 New Zealander 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.