Guangdong Jinma Entertainment (SZSE:300756 investor three-year losses grow to 30% as the stock sheds CN¥299m this past week
Many investors define successful investing as beating the market average over the long term. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that's been the case for longer term Guangdong Jinma Entertainment Corporation Limited (SZSE:300756) shareholders, since the share price is down 30% in the last three years, falling well short of the market decline of around 19%. Even worse, it's down 19% in about a month, which isn't fun at all.
With the stock having lost 12% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
Check out our latest analysis for Guangdong Jinma Entertainment
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Over the three years that the share price declined, Guangdong Jinma Entertainment's earnings per share (EPS) dropped significantly, falling to a loss. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. But it's safe to say we'd generally expect the share price to be lower as a result!
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into Guangdong Jinma Entertainment's key metrics by checking this interactive graph of Guangdong Jinma Entertainment's earnings, revenue and cash flow.
A Different Perspective
Investors in Guangdong Jinma Entertainment had a tough year, with a total loss of 15% (including dividends), against a market gain of about 6.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5% 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. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Guangdong Jinma Entertainment (at least 1 which is significant) , and understanding them should be part of your investment process.
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.
About SZSE:300756
Guangdong Jinma Entertainment
Designs, manufactures, and installs amusement facilities.
Adequate balance sheet and slightly overvalued.