The five-year loss for IPE Group (HKG:929) shareholders likely driven by its shrinking earnings

IPE Group Limited (HKG:929) shareholders should be happy to see the share price up 14% in the last week. But that doesn't change the fact that the returns over the last five years have been less than pleasing. In fact, the share price is down 49%, which falls well short of the return you could get by buying an index fund.

On a more encouraging note the company has added HK$63m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

View our latest analysis for IPE Group

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the five years over which the share price declined, IPE Group's earnings per share (EPS) dropped by 42% each year. This was, in part, due to extraordinary items impacting earnings. This fall in the EPS is worse than the 13% compound annual share price fall. The relatively muted share price reaction might be because the market expects the business to turn around. The high P/E ratio of 92.84 suggests that shareholders believe earnings will grow in the years ahead.

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

It might be well worthwhile taking a look at our free report on IPE Group's earnings, revenue and cash flow.

A Different Perspective

Although it hurts that IPE Group returned a loss of 3.8% in the last twelve months, the broader market was actually worse, returning a loss of 9.3%. Of far more concern is the 8% p.a. loss served to shareholders over the last five years. While the losses are slowing we doubt many shareholders are happy with the stock. 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. Take risks, for example - IPE Group has 4 warning signs (and 1 which is concerning) we think you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.