Further weakness as B-SOFTLtd (SZSE:300451) drops 6.5% this week, taking three-year losses to 58%

The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the long term shareholders of B-SOFT Co.,Ltd. (SZSE:300451) have had an unfortunate run in the last three years. Sadly for them, the share price is down 58% in that time. And more recent buyers are having a tough time too, with a drop of 29% in the last year. Unfortunately the share price momentum is still quite negative, with prices down 21% in thirty days.

With the stock having lost 6.5% 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 B-SOFTLtd

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. 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.

B-SOFTLtd has made a profit in the past. However, it made a loss in the last twelve months, suggesting profit may be an unreliable metric at this stage. Other metrics may better explain the share price move.

The modest 0.2% dividend yield is unlikely to be guiding the market view of the stock. We think that the revenue decline over three years, at a rate of 6.1% per year, probably had some shareholders looking to sell. And that's not surprising, since it seems unlikely that EPS growth can continue for long in the absence of revenue growth.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

While the broader market gained around 8.9% in the last year, B-SOFTLtd shareholders lost 29% (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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 9% 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. 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. Take risks, for example - B-SOFTLtd has 1 warning sign we think you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.

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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.