The main aim of stock picking is to find the market-beating stocks. But even the best stock picker will only win with some selections. So we wouldn't blame long term Bright Horizons Family Solutions Inc. (NYSE:BFAM) shareholders for doubting their decision to hold, with the stock down 31% over a half decade. The falls have accelerated recently, with the share price down 18% in the last three months.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

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

Looking back five years, both Bright Horizons Family Solutions' share price and EPS declined; the latter at a rate of 8.3% per year. Notably, the share price has fallen at 7% per year, fairly close to the change in the EPS. This implies that the market has had a fairly steady view of the stock. Rather, the share price change has reflected changes in earnings per share.

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

We know that Bright Horizons Family Solutions has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Bright Horizons Family Solutions stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Bright Horizons Family Solutions shareholders are up 16% for the year. But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 6% per year, over five years. So this might be a sign the business has turned its fortunes around. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 2 warning signs we've spotted with Bright Horizons Family Solutions .

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.