Earnings growth of 1.0% over 5 years hasn't been enough to translate into positive returns for Tongyu Communication (SZSE:002792) shareholders

The main aim of stock picking is to find the market-beating stocks. But every investor is virtually certain to have both over-performing and under-performing stocks. So we wouldn't blame long term Tongyu Communication Inc. (SZSE:002792) shareholders for doubting their decision to hold, with the stock down 34% over a half decade. More recently, the share price has dropped a further 9.0% in a month.

Since Tongyu Communication has shed CN¥450m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Tongyu Communication

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the unfortunate half decade during which the share price slipped, Tongyu Communication actually saw its earnings per share (EPS) improve by 5.3% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Alternatively, growth expectations may have been unreasonable in the past.

Due to the lack of correlation between the EPS growth and the falling share price, it's worth taking a look at other metrics to try to understand the share price movement.

We don't think that the 1.4% is big factor in the share price, since it's quite small, as dividends go. Arguably, the revenue drop of 6.0% a year for half a decade suggests that the company can't grow in the long term. That could explain the weak share price.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

If you are thinking of buying or selling Tongyu Communication stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While it's never nice to take a loss, Tongyu Communication shareholders can take comfort that , including dividends,their trailing twelve month loss of 5.0% wasn't as bad as the market loss of around 10%. Of far more concern is the 6% p.a. loss served to shareholders over the last five years. This sort of share price action isn't particularly encouraging, but at least the losses are slowing. It's always interesting to track share price performance over the longer term. But to understand Tongyu Communication better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Tongyu Communication (of which 1 is a bit unpleasant!) you should know about.

Of course Tongyu Communication 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.