The three-year loss for JD.com (NASDAQ:JD) shareholders likely driven by its shrinking earnings

It is a pleasure to report that the JD.com, Inc. (NASDAQ:JD) is up 45% in the last quarter. But that doesn't change the fact that the returns over the last three years have been disappointing. Regrettably, the share price slid 55% in that period. So it's good to see it climbing back up. After all, could be that the fall was overdone.

The recent uptick of 9.2% could be a positive sign of things to come, so let's take a look at historical fundamentals.

Check out our latest analysis for JD.com

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the three years that the share price fell, JD.com's earnings per share (EPS) dropped by 22% each year. This fall in EPS isn't far from the rate of share price decline, which was 23% per year. That suggests that the market sentiment around the company hasn't changed much over that time, despite the disappointment. It seems like the share price is reflecting the declining earnings per share.

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

We know that JD.com has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, JD.com's TSR for the last 3 years was -52%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While the broader market gained around 27% in the last year, JD.com shareholders lost 6.4% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 2%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Even so, be aware that JD.com is showing 1 warning sign in our investment analysis , you should know about...

We will like JD.com better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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.