Bright Horizons Family Solutions Inc. (NYSE:BFAM) shareholders should be happy to see the share price up 11% in the last month. But that doesn't change the fact that the returns over the last three years have been less than pleasing. After all, the share price is down 37% in the last three years, significantly under-performing the market.

While the last three years has been tough for Bright Horizons Family Solutions shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

See our latest analysis for Bright Horizons Family Solutions

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Bright Horizons Family Solutions saw its EPS decline at a compound rate of 21% per year, over the last three years. This fall in the EPS is worse than the 14% 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. This positive sentiment is also reflected in the generous P/E ratio of 67.55.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

We regret to report that Bright Horizons Family Solutions shareholders are down 37% for the year. Unfortunately, that's worse than the broader market decline of 11%. 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. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Take risks, for example - Bright Horizons Family Solutions has 1 warning sign we think you should be aware of.