Shareholders in China Tourism Group Duty Free (SHSE:601888) are in the red if they invested three years ago

It's not possible to invest over long periods without making some bad investments. But really big losses can really drag down an overall portfolio. So take a moment to sympathize with the long term shareholders of China Tourism Group Duty Free Corporation Limited (SHSE:601888), who have seen the share price tank a massive 76% over a three year period. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. And more recent buyers are having a tough time too, with a drop of 45% in the last year. The falls have accelerated recently, with the share price down 21% in the last three months.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

Check out our latest analysis for China Tourism Group Duty Free

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 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.

During the three years that the share price fell, China Tourism Group Duty Free's earnings per share (EPS) dropped by 11% each year. The share price decline of 38% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that China Tourism Group Duty Free 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 15% in the twelve months, China Tourism Group Duty Free shareholders did even worse, losing 43% (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 3% per year over five years. 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. 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. Take risks, for example - China Tourism Group Duty Free has 1 warning sign we think you should be aware of.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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