The three-year loss for ZIM Integrated Shipping Services (NYSE:ZIM) shareholders likely driven by its shrinking earnings

It's nice to see the ZIM Integrated Shipping Services Ltd. (NYSE:ZIM) share price up 10% in a week. But that doesn't help the fact that the three year return is less impressive. Truth be told the share price declined 75% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.

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While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).

ZIM Integrated Shipping Services became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. So given the share price is down it's worth checking some other metrics too.

We note that the dividend seems healthy enough, so that probably doesn't explain the share price drop. However, the weak share price might be related to the fact revenue has been disappearing at a rate of 27% each year, over three years. In that case, the current EPS might be viewed by some as difficult to sustain.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We know that ZIM Integrated Shipping Services has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling ZIM Integrated Shipping Services stock, you should check out this free report showing analyst profit forecasts .

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of ZIM Integrated Shipping Services, it has a TSR of -30% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that ZIM Integrated Shipping Services shareholders have gained 111% (in total) over the last year. And yes, that does include the dividend. This recent result is much better than the 9% drop suffered by shareholders each year (on average) over the last three. The optimist would say this is evidence that the stock has bottomed, and better days lie ahead. 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. Case in point: We've spotted 2 warning signs for ZIM Integrated Shipping Services you should be aware of, and 1 of them is a bit concerning.

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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.