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The past three years for Vita Group (ASX:VTG) investors has not been profitable

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As an investor its worth striving to ensure your overall portfolio beats the market average. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term Vita Group Limited (ASX:VTG) shareholders have had that experience, with the share price dropping 80% in three years, versus a market return of about 27%. And more recent buyers are having a tough time too, with a drop of 73% in the last year. More recently, the share price has dropped a further 11% in a month.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

View our latest analysis for Vita Group

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 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.

During the three years that the share price fell, Vita Group's earnings per share (EPS) dropped by 0.3% each year. This reduction in EPS is slower than the 41% annual reduction in the share price. So it seems the market was too confident about the business, in the past. This increased caution is also evident in the rather low P/E ratio, which is sitting at 1.66.

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

earnings-per-share-growth
earnings-per-share-growth

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on Vita Group's earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Vita Group's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Vita Group's TSR, which was a 45% drop over the last 3 years, was not as bad as the share price return.

A Different Perspective

Vita Group shareholders are down 34% for the year, but the market itself is up 3.2%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Vita Group better, we need to consider many other factors. Even so, be aware that Vita Group is showing 4 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing 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 AU exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.