Investors three-year losses continue as Sun.King Technology Group (HKG:580) dips a further 10% this week, earnings continue to decline

The truth is that if you invest for long enough, you're going to end up with some losing stocks. Long term Sun.King Technology Group Limited (HKG:580) shareholders know that all too well, since the share price is down considerably over three years. Unfortunately, they have held through a 69% decline in the share price in that time. The more recent news is of little comfort, with the share price down 42% in a year. Furthermore, it's down 15% in about a quarter. That's not much fun for holders.

With the stock having lost 10% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

View our latest analysis for Sun.King Technology 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 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, Sun.King Technology Group's earnings per share (EPS) dropped by 44% each year. 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. This positive sentiment is also reflected in the generous P/E ratio of 46.42.

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

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Sun.King Technology Group's earnings, revenue and cash flow.

A Different Perspective

While the broader market gained around 1.6% in the last year, Sun.King Technology Group shareholders lost 42%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 0.4%, each year, over five years. 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. 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 2 warning signs with Sun.King Technology Group (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com