In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Betterware de México, S.A.P.I. de C.V. (NYSE:BWMX) shareholders have had that experience, with the share price dropping 48% in three years, versus a market return of about 26%. The falls have accelerated recently, with the share price down 12% in the last three months.

Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

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.

Betterware de MéxicoP.I. de saw its EPS decline at a compound rate of 61% per year, over the last three years. In comparison the 20% compound annual share price decline isn't as bad as the EPS drop-off. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in. This positive sentiment is also reflected in the generous P/E ratio of 90.95.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Dive deeper into Betterware de MéxicoP.I. de's key metrics by checking this interactive graph of Betterware de MéxicoP.I. de's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Betterware de MéxicoP.I. de, it has a TSR of -34% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While the broader market gained around 34% in the last year, Betterware de MéxicoP.I. de shareholders lost 9.2% (even including dividends). 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 11% 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 Betterware de MéxicoP.I. de better, we need to consider many other factors. Take risks, for example - Betterware de MéxicoP.I. de has 3 warning signs (and 2 which are a bit unpleasant) we think you should know about.

We will like Betterware de MéxicoP.I. de 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.