Shareholders 33% loss in Whirlpool (NYSE:WHR) partly attributable to the company's decline in earnings over past three years

Whirlpool Corporation (NYSE:WHR) shareholders should be happy to see the share price up 20% in the last month. But that cannot eclipse the less-than-impressive returns over the last three years. After all, the share price is down 44% in the last three years, significantly under-performing the market.

Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.

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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 the three years that the share price fell, Whirlpool's earnings per share (EPS) dropped by 83% each year. In comparison the 18% compound annual share price decline isn't as bad as the EPS drop-off. 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. This positive sentiment is also reflected in the generous P/E ratio of 738.66.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

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What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Whirlpool, it has a TSR of -33% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Whirlpool's TSR for the year was broadly in line with the market average, at 10%. The silver lining is that the share price is up in the short term, which flies in the face of the annualised loss of 0.7% over the last five years. While 'turnarounds seldom turn' there are green shoots for Whirlpool. 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. Case in point: We've spotted 4 warning signs for Whirlpool you should be aware of, and 1 of them can't be ignored.

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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 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.