Investors five-year losses continue as Three Squirrels (SZSE:300783) dips a further 7.8% this week, earnings continue to decline

Statistically speaking, long term investing is a profitable endeavour. But that doesn't mean long term investors can avoid big losses. Zooming in on an example, the Three Squirrels Inc. (SZSE:300783) share price dropped 66% in the last half decade. That is extremely sub-optimal, to say the least. Shareholders have had an even rougher run lately, with the share price down 23% in the last 90 days.

Since Three Squirrels has shed CN¥638m 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 Three Squirrels

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Looking back five years, both Three Squirrels' share price and EPS declined; the latter at a rate of 0.9% per year. Readers should note that the share price has fallen faster than the EPS, at a rate of 19% per year, over the period. This implies that the market was previously too optimistic about the stock.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Three Squirrels has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

A Different Perspective

Although it hurts that Three Squirrels returned a loss of 5.7% in the last twelve months, the broader market was actually worse, returning a loss of 15%. What is more upsetting is the 10% per annum loss investors have suffered over the last half decade. While the losses are slowing we doubt many shareholders are happy with the stock. 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. For example, we've discovered 2 warning signs for Three Squirrels that you should be aware of before investing here.

But note: Three Squirrels may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com