Investing in stocks inevitably means buying into some companies that perform poorly. Long term ARN Media Limited (ASX:A1N) shareholders know that all too well, since the share price is down considerably over three years. Regrettably, they have had to cope with a 66% drop in the share price over that period. And over the last year the share price fell 35%, so we doubt many shareholders are delighted. Shareholders have had an even rougher run lately, with the share price down 16% in the last 90 days.

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.

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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).

ARN Media became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. So it’s worth looking at other metrics to try to understand the share price move.

It’s quite likely that the declining dividend has caused some investors to sell their shares, pushing the price lower in the process. In contrast it does not seem particularly likely that the revenue levels are a concern for investors.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We know that ARN Media has improved its bottom line lately, but what does the future have in store? So we recommend checking out this free report showing consensus forecasts

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for ARN Media the TSR over the last 3 years was -58%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

ARN Media shareholders are down 32% for the year (even including dividends), but the market itself is up 11%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 8% 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. It’s always interesting to track share price performance over the longer term. But to understand ARN Media better, we need to consider many other factors. Case in point: We’ve spotted 2 warning signs for ARN Media you should be aware of.