As an investor, mistakes are inevitable. But really bad investments should be rare. So spare a thought for the long term shareholders of secunet Security Networks Aktiengesellschaft (ETR:YSN); the share price is down a whopping 78% in the last three years. That would be a disturbing experience. And the ride hasn't got any smoother in recent times over the last year, with the price 55% lower in that time. Furthermore, it's down 32% in about a quarter. That's not much fun for holders. 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.

After losing 7.6% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

View our latest analysis for secunet Security Networks

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).

secunet Security Networks saw its EPS decline at a compound rate of 12% per year, over the last three years. The share price decline of 40% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.

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

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

Investors in secunet Security Networks had a tough year, with a total loss of 54% (including dividends), against a market gain of about 8.7%. 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 2% 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. Before deciding if you like the current share price, check how secunet Security Networks scores on these 3 valuation metrics.