STAAR Surgical's (NASDAQ:STAA) earnings trajectory could turn positive as the stock ascends 7.2% this past week

As an investor, mistakes are inevitable. But really bad investments should be rare. So consider, for a moment, the misfortune of STAAR Surgical Company (NASDAQ:STAA) investors who have held the stock for three years as it declined a whopping 74%. That'd be enough to cause even the strongest minds some disquiet. Shareholders have had an even rougher run lately, with the share price down 29% in the last 90 days.

On a more encouraging note the company has added US$112m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

View our latest analysis for STAAR Surgical

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

STAAR Surgical saw its EPS decline at a compound rate of 8.9% per year, over the last three years. The share price decline of 36% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past. Of course, with a P/E ratio of 100.25, the market remains optimistic.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

While the broader market gained around 34% in the last year, STAAR Surgical shareholders lost 15%. 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. Longer term investors wouldn't be so upset, since they would have made 6%, each year, over five years. 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 1 warning sign for STAAR Surgical that you should be aware of before investing here.

STAAR Surgical is not the only stock that insiders are buying. For those who like to find lesser know companies this free list of growing 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.