The three-year shareholder returns and company earnings persist lower as Jiangsu Guomao Reducer (SHSE:603915) stock falls a further 15% in past week

If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. Long term Jiangsu Guomao Reducer Co., Ltd. (SHSE:603915) shareholders know that all too well, since the share price is down considerably over three years. Regrettably, they have had to cope with a 57% drop in the share price over that period. And over the last year the share price fell 44%, so we doubt many shareholders are delighted. Even worse, it's down 22% in about a month, which isn't fun at all.

Since Jiangsu Guomao Reducer has shed CN¥1.3b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Jiangsu Guomao Reducer

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.

During the three years that the share price fell, Jiangsu Guomao Reducer's earnings per share (EPS) dropped by 3.0% each year. This reduction in EPS is slower than the 25% annual reduction in the share price. So it seems the market was too confident about the business, in the past.

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

Dive deeper into Jiangsu Guomao Reducer's key metrics by checking this interactive graph of Jiangsu Guomao Reducer's earnings, revenue and cash flow.

A Different Perspective

While the broader market lost about 14% in the twelve months, Jiangsu Guomao Reducer shareholders did even worse, losing 43% (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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Take risks, for example - Jiangsu Guomao Reducer has 1 warning sign we think you should be aware of.

But note: Jiangsu Guomao Reducer may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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