Bellevue Group AG (VTX:BBN) shareholders should be happy to see the share price up 21% in the last quarter. But only the myopic could ignore the astounding decline over three years. The share price has sunk like a leaky ship, down 77% in that time. So it’s about time shareholders saw some gains. Of course the real question is whether the business can sustain a turnaround.

It’s worthwhile assessing if the company’s economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let’s do just that.

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To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ 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, Bellevue Group’s earnings per share (EPS) dropped by 62% each year. This fall in the EPS is worse than the 38% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines. With a P/E ratio of 60.75, it’s fair to say the market sees a brighter future for the business.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

This free interactive report on Bellevue Group’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Bellevue Group’s TSR for the last 3 years was -72%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

Investors in Bellevue Group had a tough year, with a total loss of 24% (including dividends), against a market gain of about 13%. 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 10% per year over five years. 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. 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 learn about the 4 warning signs we’ve spotted with Bellevue Group (including 1 which is concerning) .