Investors three-year losses continue as Hangzhou Zhongya Machinery (SZSE:300512) dips a further 14% this week, earnings continue to decline

As an investor its worth striving to ensure your overall portfolio beats the market average. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Hangzhou Zhongya Machinery Co., Ltd. (SZSE:300512) shareholders have had that experience, with the share price dropping 41% in three years, versus a market decline of about 22%. And over the last year the share price fell 33%, so we doubt many shareholders are delighted. Furthermore, it's down 19% in about a quarter. That's not much fun for holders.

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

Check out our latest analysis for Hangzhou Zhongya Machinery

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Hangzhou Zhongya Machinery saw its EPS decline at a compound rate of 20% per year, over the last three years. This fall in the EPS is worse than the 16% compound annual share price fall. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term. With a P/E ratio of 74.16, it's fair to say the market sees a brighter future for the business.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

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

A Different Perspective

We regret to report that Hangzhou Zhongya Machinery shareholders are down 32% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 10%. 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 6% 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. It's always interesting to track share price performance over the longer term. But to understand Hangzhou Zhongya Machinery better, we need to consider many other factors. Even so, be aware that Hangzhou Zhongya Machinery is showing 4 warning signs in our investment analysis , and 2 of those are concerning...

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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.