Jianzhong Construction Development (HKG:589) shareholders have lost 47% over 1 year, earnings decline likely the culprit

It's easy to match the overall market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Unfortunately the Jianzhong Construction Development Limited (HKG:589) share price slid 47% over twelve months. That falls noticeably short of the market decline of around 21%. We wouldn't rush to judgement on Jianzhong Construction Development because we don't have a long term history to look at. Shareholders have had an even rougher run lately, with the share price down 20% in the last 90 days.

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

Check out our latest analysis for Jianzhong Construction Development

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.

Unfortunately Jianzhong Construction Development reported an EPS drop of 74% for the last year. The share price fall of 47% isn't as bad as the reduction in earnings per share. It may have been that the weak EPS was not as bad as some had feared.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of Jianzhong Construction Development's earnings, revenue and cash flow.

A Different Perspective

Jianzhong Construction Development shareholders are down 47% for the year (even including dividends), even worse than the market loss of 21%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. The share price decline has continued throughout the most recent three months, down 20%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. 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. To that end, you should learn about the 4 warning signs we've spotted with Jianzhong Construction Development (including 1 which makes us a bit uncomfortable) .

Jianzhong Construction Development is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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