If you love investing in stocks you're bound to buy some losers. But the long term shareholders of IPG Photonics Corporation (NASDAQ:IPGP) have had an unfortunate run in the last three years. So they might be feeling emotional about the 56% share price collapse, in that time. The falls have accelerated recently, with the share price down 23% in the last three months. But this could be related to the weak market, which is down 9.8% in the same period.

With the stock having lost 8.0% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

See our latest analysis for IPG Photonics

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. 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.

During the three years that the share price fell, IPG Photonics' earnings per share (EPS) dropped by 2.4% each year. This reduction in EPS is slower than the 24% annual reduction in the share price. So it seems the market was too confident about the business, in the past.

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

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

A Different Perspective

IPG Photonics shareholders are down 2.3% for the year, but the market itself is up 7.9%. 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. However, the loss over the last year isn't as bad as the 7% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with IPG Photonics , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.