Epoxy Base Electronic Material's (SHSE:603002 three-year decrease in earnings delivers investors with a 24% loss

Investors can earn very close to the average market return by buying an index fund. In contrast individual stocks will provide a wide range of possible returns, and may fall short. Unfortunately, that's been the case for longer term Epoxy Base Electronic Material Corporation Limited (SHSE:603002) shareholders, since the share price is down 33% in the last three years, less than the market decline of around 22%. Shareholders have had an even rougher run lately, with the share price down 25% in the last 90 days.

Since Epoxy Base Electronic Material has shed CN¥454m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Epoxy Base Electronic Material

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

During the three years that the share price fell, Epoxy Base Electronic Material's earnings per share (EPS) dropped by 38% each year. In comparison the 12% compound annual share price decline isn't as bad as the EPS drop-off. 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. With a P/E ratio of 60.63, it's fair to say the market sees a brighter future for the business.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It might be well worthwhile taking a look at our free report on Epoxy Base Electronic Material's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Epoxy Base Electronic Material's TSR for the last 3 years was -24%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market lost about 10% in the twelve months, Epoxy Base Electronic Material shareholders did even worse, losing 12% (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. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. 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 Epoxy Base Electronic Material better, we need to consider many other factors. To that end, you should be aware of the 4 warning signs we've spotted with Epoxy Base Electronic Material .

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.