Market is not liking China Wan Tong Yuan (Holdings)'s (HKG:6966) earnings decline as stock retreats 23% this week

Ideally, your overall portfolio should beat the market average. But the main game is to find enough winners to more than offset the losers So we wouldn't blame long term China Wan Tong Yuan (Holdings) Limited (HKG:6966) shareholders for doubting their decision to hold, with the stock down 12% over a half decade. It's down 27% in about a quarter.

If the past week is anything to go by, investor sentiment for China Wan Tong Yuan (Holdings) isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

Check out our latest analysis for China Wan Tong Yuan (Holdings)

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 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, China Wan Tong Yuan (Holdings)'s earnings per share (EPS) dropped by 15% each year. This fall in the EPS is worse than the 3% compound annual share price fall. So investors might expect EPS to bounce back -- or they may have previously foreseen the EPS decline.

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

Dive deeper into China Wan Tong Yuan (Holdings)'s key metrics by checking this interactive graph of China Wan Tong Yuan (Holdings)'s earnings, revenue and cash flow.

A Different Perspective

Investors in China Wan Tong Yuan (Holdings) had a tough year, with a total loss of 6.9% (including dividends), against a market gain of about 36%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 2% 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. It's always interesting to track share price performance over the longer term. But to understand China Wan Tong Yuan (Holdings) better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for China Wan Tong Yuan (Holdings) you should be aware of, and 1 of them doesn't sit too well with us.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.