Guangdong Liantai Environmental ProtectionLtd (SHSE:603797) stock falls 15% in past week as three-year earnings and shareholder returns continue downward trend

For many investors, the main point of stock picking is to generate higher returns than the overall market. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term Guangdong Liantai Environmental Protection Co.,Ltd. (SHSE:603797) shareholders, since the share price is down 49% in the last three years, falling well short of the market decline of around 18%. And over the last year the share price fell 30%, so we doubt many shareholders are delighted. Shareholders have had an even rougher run lately, with the share price down 29% in the last 90 days.

Since Guangdong Liantai Environmental ProtectionLtd has shed CN¥398m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out our latest analysis for Guangdong Liantai Environmental ProtectionLtd

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 Liantai Environmental ProtectionLtd's earnings per share (EPS) dropped by 6.7% each year. The share price decline of 20% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past. The less favorable sentiment is reflected in its current P/E ratio of 9.85.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

This free interactive report on Guangdong Liantai Environmental ProtectionLtd's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Guangdong Liantai Environmental ProtectionLtd's total shareholder return (TSR) and its share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Guangdong Liantai Environmental ProtectionLtd's TSR of was a loss of 46% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

While the broader market lost about 17% in the twelve months, Guangdong Liantai Environmental ProtectionLtd shareholders did even worse, losing 30%. 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. 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 risks, for instance. Every company has them, and we've spotted 1 warning sign for Guangdong Liantai Environmental ProtectionLtd you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.