While shareholders of YOUNGY (SZSE:002192) are in the red over the last three years, underlying earnings have actually grown

The truth is that if you invest for long enough, you're going to end up with some losing stocks. But long term YOUNGY Co., Ltd. (SZSE:002192) shareholders have had a particularly rough ride in the last three year. Unfortunately, they have held through a 66% decline in the share price in that time. The falls have accelerated recently, with the share price down 13% in the last three months. However, one could argue that the price has been influenced by the general market, which is down 6.5% in the same timeframe.

While the last three years has been tough for YOUNGY shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

Check out our latest analysis for YOUNGY

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Although the share price is down over three years, YOUNGY actually managed to grow EPS by 67% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

With a rather small yield of just 0.9% we doubt that the stock's share price is based on its dividend. Arguably the revenue decline of 3.2% per year has people thinking YOUNGY 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).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

While the broader market gained around 20% in the last year, YOUNGY shareholders lost 16% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 9%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand YOUNGY better, we need to consider many other factors. Take risks, for example - YOUNGY has 3 warning signs 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.