Investing in stocks inevitably means buying into some companies that perform poorly. But long term Autohome Inc. (NYSE:ATHM) shareholders have had a particularly rough ride in the last three year. Regrettably, they have had to cope with a 64% drop in the share price over that period. And more recent buyers are having a tough time too, with a drop of 23% in the last year. The last week also saw the share price slip down another 6.0%. But this could be related to the soft market, which is down about 4.7% in the same period.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

View our latest analysis for Autohome

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 three years that the share price fell, Autohome's earnings per share (EPS) dropped by 24% each year. This change in EPS is reasonably close to the 29% average annual decrease in the share price. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. In this case, it seems that the EPS is guiding the share price.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Dive deeper into Autohome's key metrics by checking this interactive graph of Autohome's earnings, revenue and cash flow.

A Different Perspective

We regret to report that Autohome shareholders are down 22% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 17%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 1 warning sign for Autohome that you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.