The past three-year earnings decline for Inner Mongolia Baotou Steel Union (SHSE:600010) likely explains shareholders long-term losses

If you love investing in stocks you're bound to buy some losers. But the last three years have been particularly tough on longer term Inner Mongolia Baotou Steel Union Co., Ltd. (SHSE:600010) shareholders. Sadly for them, the share price is down 55% in that time.

While the stock has risen 3.6% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

See our latest analysis for Inner Mongolia Baotou Steel Union

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.

Inner Mongolia Baotou Steel Union became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. So it's worth looking at other metrics to try to understand the share price move.

Arguably the revenue decline of 6.6% per year has people thinking Inner Mongolia Baotou Steel Union is shrinking. 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).

We know that Inner Mongolia Baotou Steel Union has improved its bottom line lately, but what does the future have in store? So we recommend checking out this free report showing consensus forecasts

A Different Perspective

While it's never nice to take a loss, Inner Mongolia Baotou Steel Union shareholders can take comfort that their trailing twelve month loss of 16% wasn't as bad as the market loss of around 19%. Given the total loss of 0.1% per year over five years, it seems returns have deteriorated in the last twelve months. Whilst Baron Rothschild does tell the investor "buy when there's blood in the streets, even if the blood is your own", buyers would need to examine the data carefully to be comfortable that the business itself is sound. 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 - Inner Mongolia Baotou Steel Union has 2 warning signs (and 1 which is significant) we think you should know about.

Of course Inner Mongolia Baotou Steel Union may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.