If you love investing in stocks you're bound to buy some losers. But the last three years have been particularly tough on longer term Ziff Davis, Inc. (NASDAQ:ZD) shareholders. Regrettably, they have had to cope with a 61% drop in the share price over that period. And over the last year the share price fell 38%, so we doubt many shareholders are delighted. Furthermore, it's down 31% in about a quarter. That's not much fun for holders.

With the stock having lost 9.9% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

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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 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).

During the three years that the share price fell, Ziff Davis' earnings per share (EPS) dropped by 45% each year. This fall in the EPS is worse than the 27% compound annual share price fall. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term.

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

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. It might be well worthwhile taking a look at our free report on Ziff Davis' earnings, revenue and cash flow.

A Different Perspective

Ziff Davis shareholders are down 38% for the year, but the market itself is up 9.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 7% over the last half decade. 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. It's always interesting to track share price performance over the longer term. But to understand Ziff Davis better, we need to consider many other factors. For instance, we've identified 1 warning sign for Ziff Davis that you should be aware of.

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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.