Shenzhen Leaguer (SZSE:002243) sheds CN¥508m, company earnings and investor returns have been trending downwards for past five years

We think intelligent long term investing is the way to go. But unfortunately, some companies simply don't succeed. To wit, the Shenzhen Leaguer Co., Ltd. (SZSE:002243) share price managed to fall 64% over five long years. That's not a lot of fun for true believers. And we doubt long term believers are the only worried holders, since the stock price has declined 30% over the last twelve months. The falls have accelerated recently, with the share price down 16% in the last three months.

With the stock having lost 6.7% 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 Shenzhen Leaguer

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).

During the five years over which the share price declined, Shenzhen Leaguer's earnings per share (EPS) dropped by 9.4% each year. Readers should note that the share price has fallen faster than the EPS, at a rate of 19% per year, over the period. This implies that the market was previously too optimistic about the stock.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

This free interactive report on Shenzhen Leaguer'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 8.9% in the twelve months, Shenzhen Leaguer shareholders did even worse, losing 30% (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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 10% 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. It's always interesting to track share price performance over the longer term. But to understand Shenzhen Leaguer better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Shenzhen Leaguer (of which 1 is significant!) you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.