Investing in stocks inevitably means buying into some companies that perform poorly. But the last three years have been particularly tough on longer term Neo Performance Materials Inc. (TSE:NEO) shareholders. So they might be feeling emotional about the 57% share price collapse, in that time.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for Neo Performance Materials

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. 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.

We know that Neo Performance Materials has been profitable in the past. However, it made a loss in the last twelve months, suggesting profit may be an unreliable metric at this stage. Other metrics may better explain the share price move.

It's quite likely that the declining dividend has caused some investors to sell their shares, pushing the price lower in the process. In contrast it does not seem particularly likely that the revenue levels are a concern for investors.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. If you are thinking of buying or selling Neo Performance Materials stock, you should check out this free report showing analyst profit forecasts.

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Neo Performance Materials, it has a TSR of -52% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

Neo Performance Materials shareholders gained a total return of 15% during the year. But that return falls short of the market. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 4% endured over half a decade. It could well be that the business is stabilizing. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 1 warning sign for Neo Performance Materials you should be aware of.