The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Investors in Bonterra Energy Corp. (TSE:BNE) have tasted that bitter downside in the last year, as the share price dropped 12%. That's well below the market return of 14%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 4.8% in three years. In the last ninety days we've seen the share price slide 15%. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.

It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.

Check out our latest analysis for Bonterra Energy

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 Bonterra Energy reported an EPS drop of 51% for the last year. This fall in the EPS is significantly worse than the 12% the share price fall. It may have been that the weak EPS was not as bad as some had feared.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Dive deeper into the earnings by checking this interactive graph of Bonterra Energy's earnings, revenue and cash flow.

A Different Perspective

Bonterra Energy shareholders are down 12% for the year, but the market itself is up 14%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.7% per year over five years. 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. 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. Case in point: We've spotted 1 warning sign for Bonterra Energy you should be aware of.