Edgewell Personal Care's (NYSE:EPC) earnings have declined over three years, contributing to shareholders 15% loss

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Edgewell Personal Care Company (NYSE:EPC) shareholders have had that experience, with the share price dropping 19% in three years, versus a market return of about 24%. On the other hand the share price has bounced 6.5% over the last week. The buoyant market could have helped drive the share price pop, since stocks are up 5.8% in the same period.

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

Our free stock report includes 3 warning signs investors should be aware of before investing in Edgewell Personal Care. Read for free now.

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Edgewell Personal Care saw its EPS decline at a compound rate of 2.2% per year, over the last three years. This reduction in EPS is slower than the 7% annual reduction in the share price. So it seems the market was too confident about the business, in the past.

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

This free interactive report on Edgewell Personal Care's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Edgewell Personal Care, it has a TSR of -15% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Edgewell Personal Care shareholders are down 15% for the year (even including dividends), but the market itself is up 6.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 4% per year over half a decade. 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. It's always interesting to track share price performance over the longer term. But to understand Edgewell Personal Care better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Edgewell Personal Care (of which 1 is concerning!) you should know about.

Of course Edgewell Personal Care may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.