Investors three-year losses continue as Nexteer Automotive Group (HKG:1316) dips a further 7.1% this week, earnings continue to decline

Nexteer Automotive Group Limited (HKG:1316) shareholders should be happy to see the share price up 27% in the last quarter. But that doesn't change the fact that the returns over the last three years have been disappointing. In that time, the share price dropped 65%. So the improvement may be a real relief to some. Perhaps the company has turned over a new leaf.

If the past week is anything to go by, investor sentiment for Nexteer Automotive Group isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

Check out our latest analysis for Nexteer Automotive Group

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Nexteer Automotive Group saw its EPS decline at a compound rate of 55% per year, over the last three years. This fall in the EPS is worse than the 30% 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 57.24.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It might be well worthwhile taking a look at our free report on Nexteer Automotive Group's earnings, revenue and cash flow.

A Different Perspective

Nexteer Automotive Group shareholders are down 27% for the year (even including dividends), but the market itself is up 26%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 8% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Nexteer Automotive Group , and understanding them should be part of your investment process.

We will like Nexteer Automotive Group better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong 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.