PNC Process Systems (SHSE:603690) sheds CN¥744m, company earnings and investor returns have been trending downwards for past three years

It is doubtless a positive to see that the PNC Process Systems Co., Ltd. (SHSE:603690) share price has gained some 37% in the last three months. But that doesn't help the fact that the three year return is less impressive. After all, the share price is down 43% in the last three years, significantly under-performing the market.

Since PNC Process Systems has shed CN¥744m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for PNC Process Systems

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 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 the three years that the share price fell, PNC Process Systems' earnings per share (EPS) dropped by 1.2% each year. This reduction in EPS is slower than the 17% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on PNC Process Systems' earnings, revenue and cash flow.

A Different Perspective

Investors in PNC Process Systems had a tough year, with a total loss of 4.7% (including dividends), against a market gain of about 5.3%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 7%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand PNC Process Systems better, we need to consider many other factors. For instance, we've identified 3 warning signs for PNC Process Systems (1 is a bit unpleasant) that you should be aware of.

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 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.