The three-year loss for Etsy (NASDAQ:ETSY) shareholders likely driven by its shrinking earnings

If you love investing in stocks you're bound to buy some losers. But the last three years have been particularly tough on longer term Etsy, Inc. (NASDAQ:ETSY) shareholders. Regrettably, they have had to cope with a 65% drop in the share price over that period. The more recent news is of little comfort, with the share price down 31% in a year. The falls have accelerated recently, with the share price down 13% in the last three months. Of course, this share price action may well have been influenced by the 5.7% decline in the broader market, throughout the period.

While the last three years has been tough for Etsy shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

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To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the three years that the share price fell, Etsy's earnings per share (EPS) dropped by 10.0% each year. The share price decline of 30% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.

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 Etsy's earnings, revenue and cash flow.

A Different Perspective

Investors in Etsy had a tough year, with a total loss of 31%, against a market gain of about 10%. 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 6%, 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 Etsy better, we need to consider many other factors. 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 like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.