The past three years for TCL Zhonghuan Renewable Energy TechnologyLtd (SZSE:002129) investors has not been profitable

It's not possible to invest over long periods without making some bad investments. But really bad investments should be rare. So take a moment to sympathize with the long term shareholders of TCL Zhonghuan Renewable Energy Technology Co.,Ltd. (SZSE:002129), who have seen the share price tank a massive 79% over a three year period. That would be a disturbing experience. The more recent news is of little comfort, with the share price down 68% in a year. The falls have accelerated recently, with the share price down 23% in the last three months. However, one could argue that the price has been influenced by the general market, which is down 13% in the same timeframe.

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 TCL Zhonghuan Renewable Energy TechnologyLtd

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

TCL Zhonghuan Renewable Energy TechnologyLtd saw its share price decline over the three years in which its EPS also dropped, falling to a loss. Due to the loss, it's not easy to use EPS as a reliable guide to the business. But it's safe to say we'd generally expect the share price to be lower as a result!

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

While the broader market lost about 19% in the twelve months, TCL Zhonghuan Renewable Energy TechnologyLtd shareholders did even worse, losing 66% (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 4% 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for TCL Zhonghuan Renewable Energy TechnologyLtd you should know about.

But note: TCL Zhonghuan Renewable Energy TechnologyLtd may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.