The past three years for Nomad Foods (NYSE:NOMD) investors has not been profitable

As an investor its worth striving to ensure your overall portfolio beats the market average. But if you try your hand at stock picking, you risk returning less than the market. Unfortunately, that's been the case for longer term Nomad Foods Limited (NYSE:NOMD) shareholders, since the share price is down 35% in the last three years, falling well short of the market return of around 22%. More recently, the share price has dropped a further 9.9% in a month.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for Nomad Foods

There is no denying that markets are sometimes efficient, but prices do not always reflect 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 unfortunate three years of share price decline, Nomad Foods actually saw its earnings per share (EPS) improve by 2.8% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.

It looks to us like the market was probably too optimistic around growth three years ago. Looking to other metrics might better explain the share price change.

Revenue is actually up 7.1% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating Nomad Foods further; while we may be missing something on this analysis, there might also be an opportunity.

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

This free interactive report on Nomad Foods' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Nomad Foods shareholders gained a total return of 20% during the year. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 0.8% endured over half a decade. So this might be a sign the business has turned its fortunes around. It's always interesting to track share price performance over the longer term. But to understand Nomad Foods better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Nomad Foods (of which 1 is potentially serious!) you should know about.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.