Market is not liking Charles River Laboratories International's (NYSE:CRL) earnings decline as stock retreats 4.4% this week

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term Charles River Laboratories International, Inc. (NYSE:CRL) shareholders, since the share price is down 44% in the last three years, falling well short of the market return of around 27%. And over the last year the share price fell 42%, so we doubt many shareholders are delighted. Shareholders have had an even rougher run lately, with the share price down 15% in the last 90 days.

With the stock having lost 4.4% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

Charles River Laboratories International saw its EPS decline at a compound rate of 70% per year, over the last three years. This fall in the EPS is worse than the 18% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines. This positive sentiment is also reflected in the generous P/E ratio of 785.03.

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

It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. This free interactive report on Charles River Laboratories International's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Investors in Charles River Laboratories International had a tough year, with a total loss of 42%, against a market gain of about 9.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 5%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Charles River Laboratories International better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Charles River Laboratories International you should be aware of.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.

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.