Beijing Originwater Technology's (SZSE:300070) earnings trajectory could turn positive as the stock lifts 6.9% this past week

Investing in stocks inevitably means buying into some companies that perform poorly. But the last three years have been particularly tough on longer term Beijing Originwater Technology Co., Ltd. (SZSE:300070) shareholders. So they might be feeling emotional about the 58% share price collapse, in that time. And over the last year the share price fell 33%, so we doubt many shareholders are delighted. The falls have accelerated recently, with the share price down 20% in the last three months. Of course, this share price action may well have been influenced by the 8.4% decline in the broader market, throughout the period.

While the last three years has been tough for Beijing Originwater Technology shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

View our latest analysis for Beijing Originwater Technology

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.

Beijing Originwater Technology saw its EPS decline at a compound rate of 21% per year, over the last three years. This fall in EPS isn't far from the rate of share price decline, which was 25% per year. That suggests that the market sentiment around the company hasn't changed much over that time, despite the disappointment. In this case, it seems that the EPS is guiding the share price.

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

Dive deeper into Beijing Originwater Technology's key metrics by checking this interactive graph of Beijing Originwater Technology's earnings, revenue and cash flow.

A Different Perspective

While the broader market lost about 19% in the twelve months, Beijing Originwater Technology shareholders did even worse, losing 32% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8% over the last half decade. 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. Even so, be aware that Beijing Originwater Technology is showing 3 warning signs in our investment analysis , and 1 of those shouldn't be ignored...

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.