Shareholders in China Northern Rare Earth (Group) High-TechLtd (SHSE:600111) are in the red if they invested three years ago

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 China Northern Rare Earth (Group) High-Tech Co.,Ltd (SHSE:600111) shareholders. So they might be feeling emotional about the 67% share price collapse, in that time. And over the last year the share price fell 23%, so we doubt many shareholders are delighted.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

View our latest analysis for China Northern Rare Earth (Group) High-TechLtd

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

China Northern Rare Earth (Group) High-TechLtd saw its EPS decline at a compound rate of 20% per year, over the last three years. This reduction in EPS is slower than the 31% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.

The image below shows how EPS has 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. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free interactive report on China Northern Rare Earth (Group) High-TechLtd'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 lost about 19% in the twelve months, China Northern Rare Earth (Group) High-TechLtd shareholders did even worse, losing 23% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 10% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand China Northern Rare Earth (Group) High-TechLtd better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with China Northern Rare Earth (Group) High-TechLtd .

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.