If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But long term IPG Photonics Corporation (NASDAQ:IPGP) shareholders have had a particularly rough ride in the last three year. Regrettably, they have had to cope with a 62% drop in the share price over that period. The more recent news is of little comfort, with the share price down 38% in a year. Shareholders have had an even rougher run lately, with the share price down 24% in the last 90 days.

After losing 5.1% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

IPG Photonics saw its EPS decline at a compound rate of 8.6% per year, over the last three years. The share price decline of 28% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that IPG Photonics has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

A Different Perspective

While the broader market gained around 23% in the last year, IPG Photonics shareholders lost 38%. 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 9% over the last half decade. 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. If you would like to research IPG Photonics in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.