Investors three-year losses continue as Maxscend Microelectronics (SZSE:300782) dips a further 7.9% this week, earnings continue to decline

It is doubtless a positive to see that the Maxscend Microelectronics Company Limited (SZSE:300782) share price has gained some 45% in the last three months. But that doesn't change the fact that the returns over the last three years have been disappointing. Regrettably, the share price slid 53% in that period. So it's good to see it climbing back up. After all, could be that the fall was overdone.

With the stock having lost 7.9% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for Maxscend Microelectronics

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 three years that the share price fell, Maxscend Microelectronics' earnings per share (EPS) dropped by 27% each year. This fall in the EPS is worse than the 22% compound annual share price fall. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term. This positive sentiment is also reflected in the generous P/E ratio of 70.55.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It might be well worthwhile taking a look at our free report on Maxscend Microelectronics' earnings, revenue and cash flow.

A Different Perspective

Maxscend Microelectronics shareholders are down 29% for the year (even including dividends), but the market itself is up 4.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 4% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Maxscend Microelectronics better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Maxscend Microelectronics (at least 2 which are significant) , and understanding them should be part of your investment process.

Of course Maxscend Microelectronics 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.