The three-year loss for Riyue Heavy IndustryLtd (SHSE:603218) shareholders likely driven by its shrinking earnings

If you love investing in stocks you're bound to buy some losers. But the long term shareholders of Riyue Heavy Industry Co.,Ltd (SHSE:603218) have had an unfortunate run in the last three years. Sadly for them, the share price is down 62% in that time. And over the last year the share price fell 42%, so we doubt many shareholders are delighted. Furthermore, it's down 12% in about a quarter. That's not much fun for holders.

While the last three years has been tough for Riyue Heavy IndustryLtd shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

View our latest analysis for Riyue Heavy IndustryLtd

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Riyue Heavy IndustryLtd saw its EPS decline at a compound rate of 32% per year, over the last three years. This change in EPS is reasonably close to the 28% average annual decrease in the share price. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. Rather, the share price has approximately tracked EPS growth.

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

It might be well worthwhile taking a look at our free report on Riyue Heavy IndustryLtd's earnings, revenue and cash flow.

A Different Perspective

While the broader market lost about 15% in the twelve months, Riyue Heavy IndustryLtd shareholders did even worse, losing 42% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Riyue Heavy IndustryLtd better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Riyue Heavy IndustryLtd (of which 1 doesn't sit too well with us!) you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com