Long term investing works well, but it doesn't always work for each individual stock. We really hate to see fellow investors lose their hard-earned money. Spare a thought for those who held Synlait Milk Limited (NZSE:SML) for five whole years - as the share price tanked 86%. We also note that the stock has performed poorly over the last year, with the share price down 47%. Furthermore, it's down 19% in about a quarter. That's not much fun for holders. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.

View our latest analysis for Synlait Milk

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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).

During five years of share price growth, Synlait Milk moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics might give us a better handle on how its value is changing over time.

Revenue is actually up 14% over the time period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We know that Synlait Milk has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Synlait Milk will earn in the future (free profit forecasts).

A Different Perspective

Synlait Milk shareholders are down 47% for the year, but the market itself is up 5.4%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 13% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Synlait Milk better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Synlait Milk (of which 2 are potentially serious!) you should know about.