Qingdao Tianneng Heavy IndustriesLtd (SZSE:300569) sheds CN¥542m, company earnings and investor returns have been trending downwards for past three years

Investing in stocks inevitably means buying into some companies that perform poorly. But long term Qingdao Tianneng Heavy Industries Co.,Ltd (SZSE:300569) shareholders have had a particularly rough ride in the last three year. So they might be feeling emotional about the 65% share price collapse, in that time. And over the last year the share price fell 33%, so we doubt many shareholders are delighted. More recently, the share price has dropped a further 16% in a month. But this could be related to poor market conditions -- stocks are down 7.2% in the same time.

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

See our latest analysis for Qingdao Tianneng Heavy IndustriesLtd

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 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, Qingdao Tianneng Heavy IndustriesLtd's earnings per share (EPS) dropped by 59% each year. This fall in the EPS is worse than the 30% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines. With a P/E ratio of 90.22, it's fair to say the market sees a brighter future for the business.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It might be well worthwhile taking a look at our free report on Qingdao Tianneng Heavy IndustriesLtd's earnings, revenue and cash flow.

A Different Perspective

While the broader market gained around 6.1% in the last year, Qingdao Tianneng Heavy IndustriesLtd shareholders lost 32% (even including dividends). 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 0.7% 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. 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. For example, we've discovered 5 warning signs for Qingdao Tianneng Heavy IndustriesLtd (3 are a bit unpleasant!) that you should be aware of before investing here.

We will like Qingdao Tianneng Heavy IndustriesLtd better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.