As every investor would know, not every swing hits the sweet spot. But really big losses can really drag down an overall portfolio. So take a moment to sympathize with the long term shareholders of Weibo Corporation (NASDAQ:WB), who have seen the share price tank a massive 84% over a three year period. That'd be enough to cause even the strongest minds some disquiet. And the ride hasn't got any smoother in recent times over the last year, with the price 40% lower in that time. Furthermore, it's down 22% in about a quarter. That's not much fun for holders. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).

Weibo saw its EPS decline at a compound rate of 4.3% per year, over the last three years. The share price decline of 45% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past. The less favorable sentiment is reflected in its current P/E ratio of 6.56.

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

We know that Weibo has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Weibo's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. We note that Weibo's TSR, at -81% is higher than its share price return of -84%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.

A Different Perspective

Investors in Weibo had a tough year, with a total loss of 35%, against a market gain of about 24%. 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 12% 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 Weibo better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Weibo you should be aware of.

We will like Weibo 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.