Investing in stocks inevitably means buying into some companies that perform poorly. Long term The Boston Beer Company, Inc. (NYSE:SAM) shareholders know that all too well, since the share price is down considerably over three years. Regrettably, they have had to cope with a 54% drop in the share price over that period. And more recent buyers are having a tough time too, with a drop of 24% in the last year. But it's up 5.4% in the last week. But this could be related to the strong market, with stocks up around 4.9% in the same time.

The recent uptick of 5.4% could be a positive sign of things to come, so let's take a look at historical fundamentals.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the three years that the share price fell, Boston Beer Company's earnings per share (EPS) dropped by 26% each year. This change in EPS is reasonably close to the 23% average annual decrease in the share price. So it seems like sentiment towards the stock hasn't changed all that much over time. Rather, the share price has approximately tracked EPS growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on Boston Beer Company's earnings, revenue and cash flow.

A Different Perspective

While the broader market gained around 28% in the last year, Boston Beer Company shareholders lost 24%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6% per year over five years. 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. Before spending more time on Boston Beer Company it might be wise to click here to see if insiders have been buying or selling shares.

We will like Boston Beer Company better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.