As every investor would know, not every swing hits the sweet spot. But you want to avoid the really big losses like the plague. So spare a thought for the long term shareholders of Focusrite plc (LON:TUNE); the share price is down a whopping 84% in the last three years. That would certainly shake our confidence in the decision to own the stock. The more recent news is of little comfort, with the share price down 56% in a year. Shareholders have had an even rougher run lately, with the share price down 35% in the last 90 days. While a drop like that is definitely a body blow, money isn’t as important as health and happiness.

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.

View our latest analysis for Focusrite

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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Focusrite saw its EPS decline at a compound rate of 55% per year, over the last three years. This fall in the EPS is worse than the 45% compound annual share price fall. 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.

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

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

Focusrite shareholders are down 55% for the year (even including dividends), but the market itself is up 14%. 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 10% 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 Focusrite better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We’ve identified 3 warning signs with Focusrite (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.