Greattown Holdings (SHSE:600094) sheds CN¥418m, company earnings and investor returns have been trending downwards for past five years

Statistically speaking, long term investing is a profitable endeavour. But unfortunately, some companies simply don't succeed. For example, after five long years the Greattown Holdings Ltd. (SHSE:600094) share price is a whole 57% lower. That's an unpleasant experience for long term holders. The falls have accelerated recently, with the share price down 10% in the last three months. However, one could argue that the price has been influenced by the general market, which is down 5.0% in the same timeframe.

If the past week is anything to go by, investor sentiment for Greattown Holdings isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for Greattown Holdings

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).

During the five years over which the share price declined, Greattown Holdings' earnings per share (EPS) dropped by 34% each year. The share price decline of 16% per year isn't as bad as the EPS decline. So investors might expect EPS to bounce back -- or they may have previously foreseen the EPS decline. The high P/E ratio of 99.09 suggests that shareholders believe earnings will grow in the years ahead.

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

Dive deeper into Greattown Holdings' key metrics by checking this interactive graph of Greattown Holdings's earnings, revenue and cash flow.

A Different Perspective

It's nice to see that Greattown Holdings shareholders have received a total shareholder return of 11% over the last year. There's no doubt those recent returns are much better than the TSR loss of 9% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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. Case in point: We've spotted 3 warning signs for Greattown Holdings you should be aware of, and 1 of them shouldn't be ignored.

Of course Greattown Holdings 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com