Some stocks are best avoided. We really hate to see fellow investors lose their hard-earned money. For example, we sympathize with anyone who was caught holding Pediatrix Medical Group, Inc. (NYSE:MD) during the five years that saw its share price drop a whopping 71%. And some of the more recent buyers are probably worried, too, with the stock falling 42% in the last year. Shareholders have had an even rougher run lately, with the share price down 17% in the last 90 days. Of course, this share price action may well have been influenced by the 11% decline in the broader market, throughout the period.

Since Pediatrix Medical Group has shed US$90m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for Pediatrix Medical Group

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

During the five years over which the share price declined, Pediatrix Medical Group's earnings per share (EPS) dropped by 21% each year. Notably, the share price has fallen at 22% per year, fairly close to the change in the EPS. This implies that the market has had a fairly steady view of the stock. So it's fair to say the share price has been responding to changes in EPS.

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

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

While the broader market gained around 6.1% in the last year, Pediatrix Medical Group shareholders lost 42%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 11% per year over five years. 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 Pediatrix Medical Group better, we need to consider many other factors. For instance, we've identified 1 warning sign for Pediatrix Medical Group that you should be aware of.

We will like Pediatrix Medical Group 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.

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.