For many investors, the main point of stock picking is to generate higher returns than the overall market. 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 Eagle Plains Resources Ltd. (CVE:EPL) shareholders have had that experience, with the share price dropping 38% in three years, versus a market return of about 18%. The more recent news is of little comfort, with the share price down 38% in a year.

Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.

Check out our latest analysis for Eagle Plains Resources

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

Eagle Plains Resources 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.

The company has kept revenue pretty healthy over the last three years, so we doubt that explains the falling share price. We're not entirely sure why the share price is dropped, but it does seem likely investors have become less optimistic about the business.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Eagle Plains Resources' total shareholder return (TSR) and its share price change, which we've covered above. 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. Eagle Plains Resources hasn't been paying dividends, but its TSR of 2.6% exceeds its share price return of -38%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

Investors in Eagle Plains Resources had a tough year, with a total loss of 38%, against a market gain of about 12%. 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. Longer term investors wouldn't be so upset, since they would have made 11%, each year, over five years. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Eagle Plains Resources , and understanding them should be part of your investment process.