The truth is that if you invest for long enough, you're going to end up with some losing stocks. But long term Carl Zeiss Meditec AG (ETR:AFX) shareholders have had a particularly rough ride in the last three year. Regrettably, they have had to cope with a 66% drop in the share price over that period. And the ride hasn't got any smoother in recent times over the last year, with the price 28% lower in that time. The falls have accelerated recently, with the share price down 21% in the last three months.

On a more encouraging note the company has added €326m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

See our latest analysis for Carl Zeiss Meditec

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

Carl Zeiss Meditec saw its EPS decline at a compound rate of 4.9% per year, over the last three years. The share price decline of 30% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

Investors in Carl Zeiss Meditec had a tough year, with a total loss of 28% (including dividends), against a market gain of about 9.4%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Carl Zeiss Meditec better, we need to consider many other factors. For example, we've discovered 2 warning signs for Carl Zeiss Meditec that you should be aware of before investing here.