13% earnings growth over 3 years has not materialized into gains for BTG Hotels (Group) (SHSE:600258) shareholders over that period

If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But long term BTG Hotels (Group) Co., Ltd. (SHSE:600258) shareholders have had a particularly rough ride in the last three year. Regrettably, they have had to cope with a 53% drop in the share price over that period. And the ride hasn't got any smoother in recent times over the last year, with the price 38% lower in that time. Shareholders have had an even rougher run lately, with the share price down 19% in the last 90 days. Of course, this share price action may well have been influenced by the 13% decline in the broader market, throughout the period.

With the stock having lost 4.5% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

View our latest analysis for BTG Hotels (Group)

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Although the share price is down over three years, BTG Hotels (Group) actually managed to grow EPS by 42% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

With a rather small yield of just 2.0% we doubt that the stock's share price is based on its dividend. We note that, in three years, revenue has actually grown at a 9.6% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating BTG Hotels (Group) further; while we may be missing something on this analysis, there might also be an opportunity.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

BTG Hotels (Group) is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.

A Different Perspective

While the broader market lost about 19% in the twelve months, BTG Hotels (Group) shareholders did even worse, losing 37% (even including dividends). 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. It's always interesting to track share price performance over the longer term. But to understand BTG Hotels (Group) better, we need to consider many other factors. For example, we've discovered 1 warning sign for BTG Hotels (Group) that you should be aware of before investing here.

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.

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.