Shareholders in American Axle & Manufacturing Holdings (NYSE:AXL) have lost 30%, as stock drops 14% this past week

American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) shareholders should be happy to see the share price up 21% in the last quarter. But that doesn't help the fact that the three year return is less impressive. In fact, the share price is down 30% in the last three years, falling well short of the market return.

Since American Axle & Manufacturing Holdings has shed US$107m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

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While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

During five years of share price growth, American Axle & Manufacturing Holdings moved from a loss to profitability. We would usually expect to see the share price rise as a result. So given the share price is down it's worth checking some other metrics too.

The company has kept revenue pretty healthy over the last three years, so we doubt that explains the falling share price. There doesn't seem to be any clear correlation between the fundamental business metrics and the share price. That could mean that the stock was previously overrated, or it could spell opportunity now.

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

We know that American Axle & Manufacturing Holdings has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling American Axle & Manufacturing Holdings stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

Investors in American Axle & Manufacturing Holdings had a tough year, with a total loss of 13%, against a market gain of about 15%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4% 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. It's always interesting to track share price performance over the longer term. But to understand American Axle & Manufacturing Holdings better, we need to consider many other factors. For example, we've discovered 1 warning sign for American Axle & Manufacturing Holdings that you should be aware of before investing here.

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 American 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.