It's easy to match the overall market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Unfortunately the XP Power Limited (LON:XPP) share price slid 47% over twelve months. That's well below the market decline of 2.2%. However, the longer term returns haven't been so bad, with the stock down 20% in the last three years. Unfortunately the share price momentum is still quite negative, with prices down 21% in thirty days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for XP Power

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 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).

During the last year XP Power saw its earnings per share drop below zero. Some investors no doubt dumped the stock as a result. However, there may be an opportunity for investors if the company can recover.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

While the broader market lost about 2.2% in the twelve months, XP Power shareholders did even worse, losing 45% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5% 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. 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. Even so, be aware that XP Power is showing 2 warning signs in our investment analysis , you should know about...