The three-year shareholder returns and company earnings persist lower as Center International GroupLtd (SHSE:603098) stock falls a further 7.7% in past week

Center International Group Co.,Ltd. (SHSE:603098) shareholders will doubtless be very grateful to see the share price up 44% in the last quarter. But that is meagre solace in the face of the shocking decline over three years. In that time the share price has melted like a snowball in the desert, down 74%. So it sure is nice to see a bit of an improvement. But the more important question is whether the underlying business can justify a higher price still.

With the stock having lost 7.7% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

View our latest analysis for Center International GroupLtd

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Center International GroupLtd saw its EPS decline at a compound rate of 29% per year, over the last three years. This reduction in EPS is slower than the 36% annual reduction in the share price. So it seems the market was too confident about the business, in the past. Of course, with a P/E ratio of 112.74, the market remains optimistic.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

Investors in Center International GroupLtd had a tough year, with a total loss of 18% (including dividends), against a market gain of about 14%. 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. On the bright side, long term shareholders have made money, with a gain of 0.7% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Center International GroupLtd (at least 1 which makes us a bit uncomfortable) , and understanding them should be part of your investment process.

We will like Center International GroupLtd better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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 Chinese 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.