The three-year loss for Guangzhou Baiyun Electric Equipment (SHSE:603861) shareholders likely driven by its shrinking earnings

Guangzhou Baiyun Electric Equipment Co., Ltd. (SHSE:603861) shareholders should be happy to see the share price up 18% in the last month. But we must note it seems the three year returns are less impressive. Specifically, the stock price is down 23% whereas the market is down , having returned (-21%).

On a more encouraging note the company has added CN¥582m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

View our latest analysis for Guangzhou Baiyun Electric Equipment

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...' 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).

Guangzhou Baiyun Electric Equipment saw its EPS decline at a compound rate of 19% per year, over the last three years. In comparison the 9% compound annual share price decline isn't as bad as the EPS drop-off. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

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

A Different Perspective

It's good to see that Guangzhou Baiyun Electric Equipment has rewarded shareholders with a total shareholder return of 3.0% in the last twelve months. And that does include the dividend. That's better than the annualised return of 1.2% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Even so, be aware that Guangzhou Baiyun Electric Equipment is showing 3 warning signs in our investment analysis , and 2 of those are significant...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.