Investors three-year losses continue as HealthcareLtd (SHSE:603313) dips a further 8.8% this week, earnings continue to decline

Healthcare Co.,Ltd. (SHSE:603313) shareholders should be happy to see the share price up 17% in the last month. But that doesn't change the fact that the returns over the last three years have been disappointing. Indeed, the share price is down a tragic 60% in the last three years. Some might say the recent bounce is to be expected after such a bad drop. The rise has some hopeful, but turnarounds are often precarious.

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

View our latest analysis for HealthcareLtd

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 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.

HealthcareLtd saw its EPS decline at a compound rate of 41% per year, over the last three years. This fall in the EPS is worse than the 26% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines. This positive sentiment is also reflected in the generous P/E ratio of 59.86.

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

HealthcareLtd shareholders are down 44% for the year, but the market itself is up 2.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. 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. 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. It's always interesting to track share price performance over the longer term. But to understand HealthcareLtd better, we need to consider many other factors. For example, we've discovered 1 warning sign for HealthcareLtd that you should be aware of before investing here.

We will like HealthcareLtd 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.

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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.