The three-year shareholder returns and company earnings persist lower as Jiangsu Hengshun Vinegar-IndustryLtd (SHSE:600305) stock falls a further 5.9% in past week

If you love investing in stocks you're bound to buy some losers. But long term Jiangsu Hengshun Vinegar-Industry Co.,Ltd (SHSE:600305) shareholders have had a particularly rough ride in the last three year. Sadly for them, the share price is down 51% in that time.

With the stock having lost 5.9% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

See our latest analysis for Jiangsu Hengshun Vinegar-IndustryLtd

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the three years that the share price fell, Jiangsu Hengshun Vinegar-IndustryLtd's earnings per share (EPS) dropped by 34% each year. This fall in the EPS is worse than the 21% compound annual share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in. This positive sentiment is also reflected in the generous P/E ratio of 122.96.

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

Jiangsu Hengshun Vinegar-IndustryLtd shareholders are down 13% for the year (even including dividends), but the market itself is up 6.1%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 7% 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. 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. Take risks, for example - Jiangsu Hengshun Vinegar-IndustryLtd has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.