Many investors define successful investing as beating the market average over the long term. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term MKS Instruments, Inc. (NASDAQ:MKSI) shareholders, since the share price is down 36% in the last three years, falling well short of the market return of around 27%.

While the stock has risen 4.1% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

See our latest analysis for MKS Instruments

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 five years of share price growth, MKS Instruments moved from a loss to profitability. We would usually expect to see the share price rise as a result. So it's worth looking at other metrics to try to understand the share price move.

The modest 0.8% dividend yield is unlikely to be guiding the market view of the stock. We note that, in three years, revenue has actually grown at a 8.7% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating MKS Instruments further; while we may be missing something on this analysis, there might also be an opportunity.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

MKS Instruments is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for MKS Instruments in this interactive graph of future profit estimates.

A Different Perspective

MKS Instruments provided a TSR of 7.3% over the last twelve months. Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 0.5% per year over five year. This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand MKS Instruments better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for MKS Instruments you should be aware of, and 1 of them is potentially serious.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.