Bank of Zhengzhou's (HKG:6196) earnings have declined over five years, contributing to shareholders 63% loss

Statistically speaking, long term investing is a profitable endeavour. But no-one is immune from buying too high. Zooming in on an example, the Bank of Zhengzhou Co., Ltd. (HKG:6196) share price dropped 67% in the last half decade. That's an unpleasant experience for long term holders. And we doubt long term believers are the only worried holders, since the stock price has declined 21% over the last twelve months. But it's up 6.4% in the last week. The buoyant market could have helped drive the share price pop, since stocks are up 7.6% in the same period.

The recent uptick of 6.4% could be a positive sign of things to come, so let's take a look at historical fundamentals.

See our latest analysis for Bank of Zhengzhou

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 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.

Looking back five years, both Bank of Zhengzhou's share price and EPS declined; the latter at a rate of 29% per year. The share price decline of 20% per year isn't as bad as the EPS decline. So the market may previously have expected a drop, or else it expects the situation will improve.

The graphic below depicts how EPS has changed over time (unveil 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.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Bank of Zhengzhou's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Bank of Zhengzhou's TSR, which was a 63% drop over the last 5 years, was not as bad as the share price return.

A Different Perspective

We regret to report that Bank of Zhengzhou shareholders are down 21% for the year. Unfortunately, that's worse than the broader market decline of 17%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 10% over the last half decade. 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. 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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Bank of Zhengzhou (of which 1 doesn't sit too well with us!) you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.