Earnings growth of 1.1% over 5 years hasn't been enough to translate into positive returns for Zall Smart Commerce Group (HKG:2098) shareholders

Long term investing is the way to go, but that doesn't mean you should hold every stock forever. We really hate to see fellow investors lose their hard-earned money. Imagine if you held Zall Smart Commerce Group Ltd. (HKG:2098) for half a decade as the share price tanked 74%. And it's not just long term holders hurting, because the stock is down 54% in the last year. Shareholders have had an even rougher run lately, with the share price down 15% in the last 90 days.

After losing 13% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 five years of share price growth, Zall Smart Commerce Group moved from a loss to profitability. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.

In contrast to the share price, revenue has actually increased by 16% a year in the five year period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of Zall Smart Commerce Group's earnings, revenue and cash flow.

A Different Perspective

Investors in Zall Smart Commerce Group had a tough year, with a total loss of 54%, against a market gain of about 49%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 12% over the last half decade. 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. It's always interesting to track share price performance over the longer term. But to understand Zall Smart Commerce Group better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with Zall Smart Commerce Group (including 2 which are a bit concerning) .

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.