Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. For example, the F.I.L.A. - Fabbrica Italiana Lapis ed Affini S.p.A. (BIT:FILA) share price is down 25% in the last year. That contrasts poorly with the market return of -3.9%. Longer term investors have fared much better, since the share price is up 9.3% in three years.

See our latest analysis for F.I.L.A. - Fabbrica Italiana Lapis ed Affini

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 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.

Unfortunately F.I.L.A. - Fabbrica Italiana Lapis ed Affini reported an EPS drop of 45% for the last year. This fall in the EPS is significantly worse than the 25% the share price fall. So despite the weak per-share profits, some investors are probably relieved the situation wasn't more difficult. With a P/E ratio of 62.33, it's fair to say the market sees an EPS rebound on the cards.

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

This free interactive report on F.I.L.A. - Fabbrica Italiana Lapis ed Affini's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of F.I.L.A. - Fabbrica Italiana Lapis ed Affini, it has a TSR of -21% for the last year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

F.I.L.A. - Fabbrica Italiana Lapis ed Affini shareholders are down 21% for the year (even including dividends), falling short of the market return. Meanwhile, the broader market slid about 3.9%, likely weighing on the stock. Investors are up over three years, booking 4.7% per year, much better than the more recent returns. Sometimes when a good quality long term winner has a weak period, it's turns out to be an opportunity, but you really need to be sure that the quality is there. Is F.I.L.A. - Fabbrica Italiana Lapis ed Affini cheap compared to other companies? These 3 valuation measures might help you decide.

Of course F.I.L.A. - Fabbrica Italiana Lapis ed Affini may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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

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.

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. Thank you for reading.