Investors in Etsy (NASDAQ:ETSY) have unfortunately lost 75% over the last three years

Etsy, Inc. (NASDAQ:ETSY) shareholders should be happy to see the share price up 13% in the last month. But the last three years have seen a terrible decline. In that time the share price has melted like a snowball in the desert, down 75%. So it sure is nice to see a bit of an improvement. Of course the real question is whether the business can sustain a turnaround.

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 Etsy

There is no denying that markets are sometimes efficient, but prices do not always reflect 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).

Etsy saw its EPS decline at a compound rate of 16% per year, over the last three years. The share price decline of 37% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

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

A Different Perspective

Investors in Etsy had a tough year, with a total loss of 33%, against a market gain of about 24%. 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. On the bright side, long term shareholders have made money, with a gain of 5% per year over half a decade. 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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Etsy (of which 1 can't be ignored!) 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 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.