Guangdong KinLong Hardware ProductsLtd (SZSE:002791) sheds CN¥619m, company earnings and investor returns have been trending downwards for past three years

As an investor, mistakes are inevitable. But really bad investments should be rare. So spare a thought for the long term shareholders of Guangdong KinLong Hardware Products Co.,Ltd. (SZSE:002791); the share price is down a whopping 87% in the last three years. That would be a disturbing experience. And the ride hasn't got any smoother in recent times over the last year, with the price 42% lower in that time. Shareholders have had an even rougher run lately, with the share price down 27% in the last 90 days. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

After losing 7.1% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

View our latest analysis for Guangdong KinLong Hardware ProductsLtd

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the three years that the share price fell, Guangdong KinLong Hardware ProductsLtd's earnings per share (EPS) dropped by 43% each year. This change in EPS is reasonably close to the 49% average annual decrease in the share price. That suggests that the market sentiment around the company hasn't changed much over that time, despite the disappointment. In this case, it seems that the EPS is guiding the share price.

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 Guangdong KinLong Hardware ProductsLtd's earnings, revenue and cash flow.

A Different Perspective

Guangdong KinLong Hardware ProductsLtd shareholders are down 42% for the year (even including dividends), but the market itself is up 10%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 7% 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. 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 Guangdong KinLong Hardware ProductsLtd is showing 1 warning sign in our investment analysis , 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.