Nexteer Automotive Group (HKG:1316) earnings and shareholder returns have been trending downwards for the last three years, but the stock grows 9.1% this past week

The truth is that if you invest for long enough, you're going to end up with some losing stocks. Long term Nexteer Automotive Group Limited (HKG:1316) shareholders know that all too well, since the share price is down considerably over three years. Regrettably, they have had to cope with a 68% drop in the share price over that period. And more recent buyers are having a tough time too, with a drop of 46% in the last year. Furthermore, it's down 32% in about a quarter. That's not much fun for holders. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

On a more encouraging note the company has added HK$577m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

See our latest analysis for Nexteer Automotive Group

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 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 32% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines. With a P/E ratio of 48.00, it's fair to say the market sees a brighter future for the business.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

Nexteer Automotive Group shareholders are down 45% for the year (even including dividends), but the market itself is up 7.7%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 9% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Nexteer Automotive Group better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Nexteer Automotive Group you should know about.

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 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.