East GroupLtd (SZSE:300376) sheds CN¥372m, company earnings and investor returns have been trending downwards for past three years

The truth is that if you invest for long enough, you're going to end up with some losing stocks. Long term East Group Co.,Ltd (SZSE:300376) shareholders know that all too well, since the share price is down considerably over three years. So they might be feeling emotional about the 57% share price collapse, in that time. And over the last year the share price fell 42%, so we doubt many shareholders are delighted.

If the past week is anything to go by, investor sentiment for East GroupLtd isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for East GroupLtd

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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, East GroupLtd's earnings per share (EPS) dropped by 28% each year. This change in EPS is reasonably close to the 25% average annual decrease in the share price. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. It seems like the share price is reflecting the declining earnings per share.

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

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized 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 East GroupLtd's earnings, revenue and cash flow.

A Different Perspective

Investors in East GroupLtd had a tough year, with a total loss of 41% (including dividends), against a market gain of about 15%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 7% per year over five years. 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 3 warning signs we've spotted with East GroupLtd .

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.