The truth is that if you invest for long enough, you're going to end up with some losing stocks. But long term Encore Capital Group, Inc. (NASDAQ:ECPG) shareholders have had a particularly rough ride in the last three year. Unfortunately, they have held through a 51% decline in the share price in that time. 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 39% in the last three months.

With the stock having lost 6.8% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Our free stock report includes 1 warning sign investors should be aware of before investing in Encore Capital Group. Read for free now.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.

We know that Encore Capital Group has been profitable in the past. However, it made a loss in the last twelve months, suggesting profit may be an unreliable metric at this stage. Other metrics might give us a better handle on how its value is changing over time.

Arguably the revenue decline of 10% per year has people thinking Encore Capital Group is shrinking. And that's not surprising, since it seems unlikely that EPS growth can continue for long in the absence of revenue growth.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

Investors in Encore Capital Group had a tough year, with a total loss of 28%, against a market gain of about 6.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 6%, each year, over five years. 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 Encore Capital Group better, we need to consider many other factors. For instance, we've identified 1 warning sign for Encore Capital Group that you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.