The three-year shareholder returns and company earnings persist lower as Shenzhen Sunway Communication (SZSE:300136) stock falls a further 7.0% in past week

Many investors define successful investing as beating the market average over the long term. But if you try your hand at stock picking, you risk returning less than the market. Unfortunately, that's been the case for longer term Shenzhen Sunway Communication Co., Ltd. (SZSE:300136) shareholders, since the share price is down 36% in the last three years, falling well short of the market decline of around 20%.

With the stock having lost 7.0% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

View our latest analysis for Shenzhen Sunway Communication

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the three years that the share price fell, Shenzhen Sunway Communication's earnings per share (EPS) dropped by 20% each year. This fall in the EPS is worse than the 14% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.

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 Shenzhen Sunway Communication's earnings, revenue and cash flow.

A Different Perspective

While it's certainly disappointing to see that Shenzhen Sunway Communication shares lost 6.1% throughout the year, that wasn't as bad as the market loss of 8.9%. Unfortunately, last year's performance may indicate unresolved challenges, given that it's worse than the annualised loss of 3% over the last half decade. While some investors do well specializing in buying companies that are struggling (but nonetheless undervalued), don't forget that Buffett said that 'turnarounds seldom turn'. 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 - Shenzhen Sunway Communication has 1 warning sign we think you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.