While not a mind-blowing move, it is good to see that the Zoom Video Communications, Inc. (NASDAQ:ZM) share price has gained 16% in the last three months. But the last three years have seen a terrible decline. Indeed, the share price is down a whopping 74% in the last three years. So it sure is nice to see a bit of an improvement. Only time will tell if the company can sustain the turnaround.

It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.

See our latest analysis for Zoom Video Communications

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.

During the three years that the share price fell, Zoom Video Communications' earnings per share (EPS) dropped by 6.3% each year. This reduction in EPS is slower than the 36% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Zoom Video Communications has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Zoom Video Communications will grow revenue in the future.

A Different Perspective

Zoom Video Communications provided a TSR of 0.9% over the last twelve months. But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 1.5% per year, over five years. So this might be a sign the business has turned its fortunes around. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Zoom Video Communications (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.