Guangzhou Kingmed Diagnostics Group (SHSE:603882) sheds CN¥1.1b, company earnings and investor returns have been trending downwards for past three years

Every investor on earth makes bad calls sometimes. But you have a problem if you face massive losses more than once in a while. So spare a thought for the long term shareholders of Guangzhou Kingmed Diagnostics Group Co., Ltd. (SHSE:603882); the share price is down a whopping 73% in the last three years. That would certainly shake our confidence in the decision to own the stock. And the ride hasn't got any smoother in recent times over the last year, with the price 54% lower in that time. Furthermore, it's down 25% in about a quarter. That's not much fun for holders.

With the stock having lost 8.1% 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 Guangzhou Kingmed Diagnostics 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.

During the three years that the share price fell, Guangzhou Kingmed Diagnostics Group's earnings per share (EPS) dropped by 58% each year. This fall in the EPS is worse than the 36% 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 79.38.

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

This free interactive report on Guangzhou Kingmed Diagnostics Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market gained around 10% in the last year, Guangzhou Kingmed Diagnostics Group shareholders lost 53% (even including dividends). 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 8% 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. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Guangzhou Kingmed Diagnostics Group , and understanding them should be part of your investment process.

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.

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.