Wangfujing Group (SHSE:600859) sheds CN¥465m, company earnings and investor returns have been trending downwards for past three years

If you love investing in stocks you're bound to buy some losers. But the long term shareholders of Wangfujing Group Co., Ltd. (SHSE:600859) have had an unfortunate run in the last three years. Regrettably, they have had to cope with a 56% drop in the share price over that period. And more recent buyers are having a tough time too, with a drop of 41% in the last year. Furthermore, it's down 13% in about a quarter. That's not much fun for holders.

Since Wangfujing Group has shed CN¥465m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for Wangfujing Group

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the three years that the share price fell, Wangfujing Group's earnings per share (EPS) dropped by 9.1% each year. This reduction in EPS is slower than the 24% annual reduction in the share price. So it seems the market was too confident about the business, in the past.

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

We know that Wangfujing Group has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

A Different Perspective

While the broader market lost about 13% in the twelve months, Wangfujing Group shareholders did even worse, losing 40% (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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 1.8% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. For instance, we've identified 1 warning sign for Wangfujing Group that you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.