Weibo Corporation (NASDAQ:WB) shareholders should be happy to see the share price up 11% in the last week. But will that heal all the wounds inflicted over 5 years of declines? Unlikely. In fact, the share price has tumbled down a mountain to land 87% lower after that period. It's true that the recent bounce could signal the company is turning over a new leaf, but we are not so sure. The important question is if the business itself justifies a higher share price in the long term. While a drop like that is definitely a body blow, money isn't as important as health and happiness.

The recent uptick of 11% could be a positive sign of things to come, so let's take a look at historical fundamentals.

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 five years over which the share price declined, Weibo's earnings per share (EPS) dropped by 11% each year. Readers should note that the share price has fallen faster than the EPS, at a rate of 34% per year, over the period. This implies that the market was previously too optimistic about the stock. The less favorable sentiment is reflected in its current P/E ratio of 6.23.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Weibo has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Weibo's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. We note that Weibo's TSR, at -85% is higher than its share price return of -87%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.

A Different Perspective

Investors in Weibo had a tough year, with a total loss of 41%, against a market gain of about 24%. 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. Before forming an opinion on Weibo you might want to consider these 3 valuation metrics.

Of course Weibo 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 American 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.