Proto Labs, Inc. (NYSE:PRLB) shareholders should be happy to see the share price up 13% in the last week. But that doesn't change the fact that the returns over the last half decade have been disappointing. In fact, the share price has declined rather badly, down some 68% in that time. So we're not so sure if the recent bounce should be celebrated. But it could be that the fall was overdone.

On a more encouraging note the company has added US$102m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, Proto Labs moved from a loss to profitability. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.

In contrast to the share price, revenue has actually increased by 2.6% a year in the five year period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We know that Proto Labs 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

A Different Perspective

Proto Labs shareholders are down 2.5% for the year, but the market itself is up 22%. 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 11% per annum loss investors have suffered over the last half decade. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. Before deciding if you like the current share price, check how Proto Labs scores on these 3 valuation metrics.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.

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