As an investor, mistakes are inevitable. But really big losses can really drag down an overall portfolio. So spare a thought for the long term shareholders of Microware Group Limited (HKG:1985); the share price is down a whopping 78% in the last three years. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. And more recent buyers are having a tough time too, with a drop of 34% in the last year. The falls have accelerated recently, with the share price down 17% in the last three months. However, one could argue that the price has been influenced by the general market, which is down 11% in the same timeframe.

View our latest analysis for Microware Group

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 unfortunate three years of share price decline, Microware Group actually saw its earnings per share (EPS) improve by 8.3% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or else the company was over-hyped in the past, and so its growth has disappointed.

Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

The company has kept revenue pretty healthy over the last three years, so we doubt that explains the falling share price. We're not entirely sure why the share price is dropped, but it does seem likely investors have become less optimistic about the business.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

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

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Microware Group's total shareholder return (TSR) and its share price change, which we've covered above. 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. Its history of dividend payouts mean that Microware Group's TSR, which was a 73% drop over the last 3 years, was not as bad as the share price return.

A Different Perspective

The last twelve months weren't great for Microware Group shares, which performed worse than the market, costing holders 30%. Meanwhile, the broader market slid about 15%, likely weighing on the stock. Unfortunately, the longer term story isn't pretty, with investment losses running at 35% per year over three years. We'd need clear signs of growth in the underlying business before we could muster much enthusiasm for this one. It's always interesting to track share price performance over the longer term. But to understand Microware Group better, we need to consider many other factors. For instance, we've identified 1 warning sign for Microware Group that you should be aware of.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.