eBay (NASDAQ:EBAY shareholders incur further losses as stock declines 3.0% this week, taking one-year losses to 39%

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by eBay Inc. (NASDAQ:EBAY) shareholders over the last year, as the share price declined 40%. That's well below the market decline of 21%. Longer term investors have fared much better, since the share price is up 4.4% in three years. Furthermore, it's down 28% in about a quarter. That's not much fun for holders. But this could be related to the weak market, which is down 18% in the same period.

Since eBay has shed US$728m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for eBay

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.

eBay fell to a loss making position during the year. While this may prove temporary, we'd consider it a negative, so it doesn't surprise us that the stock price is down. Of course, if the company can turn the situation around, investors will likely profit.

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

It might be well worthwhile taking a look at our free report on eBay's earnings, revenue and cash flow.

A Different Perspective

While the broader market lost about 21% in the twelve months, eBay shareholders did even worse, losing 39% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 5%, 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. 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. Even so, be aware that eBay is showing 3 warning signs in our investment analysis , you should know about...

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 US 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.