This month, we saw the Paragon Care Limited (ASX:PGC) up an impressive 62%. But that doesn't change the fact that the returns over the last three years have been stomach churning. To wit, the share price sky-dived 77% in that time. So we're relieved for long term holders to see a bit of uplift. Of course the real question is whether the business can sustain a turnaround.

View our latest analysis for Paragon Care

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. 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 the three years that the share price fell, Paragon Care's earnings per share (EPS) dropped by 35% each year. This change in EPS is reasonably close to the 39% average annual decrease in the share price. So it seems like sentiment towards the stock hasn't changed all that much over time. Rather, the share price has approximately tracked EPS growth.

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

It might be well worthwhile taking a look at our free report on Paragon Care's earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

We've already covered Paragon Care's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for Paragon Care shareholders, and that cash payout explains why its total shareholder loss of 75%, over the last 3 years, isn't as bad as the share price return.

A Different Perspective

We regret to report that Paragon Care shareholders are down 62% for the year. Unfortunately, that's worse than the broader market decline of 14%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 17% over the last half decade. 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. 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. Case in point: We've spotted 5 warning signs for Paragon Care you should be aware of, and 1 of them is significant.