This week we saw the Midway Limited (ASX:MWY) share price climb by 17%. But that isn't much consolation for the painful drop we've seen in the last year. Indeed, the share price is down a whopping 74% in the last year. So the rise may not be much consolation. The bigger issue is whether the company can sustain the momentum in the long term.

View our latest analysis for Midway

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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).

Unfortunately Midway reported an EPS drop of 59% for the last year. We note that the 74% share price drop is very close to the EPS drop. So it seems that the market sentiment has not changed much, despite the weak results. Instead, the change in the share price seems to reduction in earnings per share, alone.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Midway's total shareholder return (TSR) and its share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Its history of dividend payouts mean that Midway's TSR, which was a 73% drop over the last year, was not as bad as the share price return.

A Different Perspective

Midway shareholders are down 73% for the year, falling short of the market return. Meanwhile, the broader market slid about 12%, likely weighing on the stock. Shareholders have lost 22% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Midway has 4 warning signs we think you should be aware of.