The five-year loss for WuHan Yangtze Communication Industry GroupCo.Ltd (SHSE:600345) shareholders likely driven by its shrinking earnings

The main aim of stock picking is to find the market-beating stocks. But the main game is to find enough winners to more than offset the losers At this point some shareholders may be questioning their investment in WuHan Yangtze Communication Industry GroupCo.,Ltd (SHSE:600345), since the last five years saw the share price fall 31%. The falls have accelerated recently, with the share price down 19% in the last three months. Of course, this share price action may well have been influenced by the 10% decline in the broader market, throughout the period.

Although the past week has been more reassuring for shareholders, they're still in the red over the last five years, so let's see if the underlying business has been responsible for the decline.

Check out our latest analysis for WuHan Yangtze Communication Industry GroupCo.Ltd

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.

During the five years over which the share price declined, WuHan Yangtze Communication Industry GroupCo.Ltd's earnings per share (EPS) dropped by 5.9% each year. Notably, the share price has fallen at 7% per year, fairly close to the change in the EPS. That suggests that the market sentiment around the company hasn't changed much over that time. Rather, the share price change has reflected changes in earnings per share.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It might be well worthwhile taking a look at our free report on WuHan Yangtze Communication Industry GroupCo.Ltd's earnings, revenue and cash flow.

A Different Perspective

WuHan Yangtze Communication Industry GroupCo.Ltd shareholders are down 16% over twelve months (even including dividends), which isn't far from the market return of -17%. Unfortunately, last year's performance is a deterioration of an already poor long term track record, given the loss of 5% per year over the last five years. Weak performance over the long term usually destroys market confidence in a stock, but bargain hunters may want to take a closer look for signs 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 for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with WuHan Yangtze Communication Industry GroupCo.Ltd , and understanding them should be part of your investment process.

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.