Investors who have held Lentex (WSE:LTX) over the last year have watched its earnings decline along with their investment

Lentex S.A. (WSE:LTX) shareholders should be happy to see the share price up 11% in the last week. But that doesn’t alter the fact that returns have lagged the market over the last year. Specifically, the stock returned 29% whereas the market is down , having returned (-29%) over the last year.

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

See our latest analysis for Lentex

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).

Unfortunately Lentex reported an EPS drop of 33% for the last year. We note that the 29% share price drop is very close to the EPS drop. Therefore one could posit that the market has not become more concerned about the company, despite the lower EPS. Rather, the share price is remains a similar multiple of the EPS, suggesting the outlook remains the same.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

Dive deeper into Lentex’s key metrics by checking this interactive graph of Lentex’s earnings, revenue and cash flow.

A Different Perspective

The total return of 29% received by Lentex shareholders over the last year isn’t far from the market return of -28%. So last year was actually even worse than the last five years, which cost shareholders 0.3% per year. Weak performance over the long term usually destroys market confidence in a stock, but bargain hunters may want to take a closer look for signs of a turnaround. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example – Lentex has 2 warning signs we think you should be aware of.

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 PL 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.