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Dollar Tree (NASDAQ:DLTR) shareholders suffered a 26% loss when they invested in the stock a year ago.

Passive investing in an index fund is a good way to ensure that your own returns are roughly in line with those of the overall market. While individual stocks can be big winners, many others fail to deliver satisfactory returns. This downside risk has been recognized by Dollar Tree, Inc. (NASDAQ:DLTR) shareholders last year as the stock price fell 26%. This is disappointing considering the market returned 23%. On the other hand, the stock is actually high 7.4% over three years. The declines have accelerated recently, with the share price down 20% in the last three months. Note that the company only recently announced its results and the market is not happy. You can find the latest figures in our company report.

With this in mind, it is worth examining whether the company’s underlying fundamentals have been the driver of its long-term performance or whether there are some discrepancies.

Check out our latest analysis for Dollar Tree

There’s no denying that markets are sometimes efficient, but prices don’t always reflect underlying business performance. An imperfect but simple way to examine how the market perception of a company has changed is to compare the change in earnings per share (EPS) with the share price movement.

Dollar Tree’s earnings per share fell below zero last year, which no doubt caused some investors to dump the stock. If the company can turn things around, investors will likely benefit.

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

Earnings per share growthEarnings per share growth

Earnings per share growth

It is probably worth mentioning that we have seen significant insider buying in the last quarter, which we consider to be a positive. On the other hand, we believe that revenue and earnings trends are much more meaningful metrics for the business. This free Dollar Tree’s interactive earnings, revenue and cash flow report is a good place to start if you want to investigate the stock further.

A different perspective

It’s been a rough year for Dollar Tree investors, with a total loss of 26% while the market has gained about 23%. Keep in mind, however, that even the best stocks sometimes underperform the market over a twelve-month period. Unfortunately, last year’s performance may indicate unresolved issues, as it was worse than the 0.5% annualized loss over the past five years. Generally speaking, long-term weakness in a share price can be a bad sign, although contrarian investors should research the stock in hopes of a turnaround. Investors who like to make money usually review insider purchases, such as the price paid and total purchase amount. You can learn about Dollar Tree’s insider purchases by clicking this link.

Dollar Tree is not the only stock that insiders are buying. For those who like to find lesser-known companies The free A list of growing companies with recent insider purchases might be just the thing.

Please note that the market returns quoted in this article reflect the market weighted average returns of stocks currently trading on U.S. exchanges.

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This Simply Wall St article is of a general nature. We comment solely on historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.

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