Hanhua Financial Holding (HKG:3903) sheds HK$143m, company earnings and investor returns have been trending downwards for past three years

If you love investing in stocks you're bound to buy some losers. But the last three years have been particularly tough on longer term Hanhua Financial Holding Co., Ltd. (HKG:3903) shareholders. Sadly for them, the share price is down 65% in that time. The more recent news is of little comfort, with the share price down 34% in a year. More recently, the share price has dropped a further 16% in a month. But this could be related to poor market conditions -- stocks are down 8.0% in the same time.

With the stock having lost 12% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for Hanhua Financial Holding

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 the three years that the share price fell, Hanhua Financial Holding's earnings per share (EPS) dropped by 40% each year. This fall in the EPS is worse than the 29% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.

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

This free interactive report on Hanhua Financial Holding's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market lost about 2.5% in the twelve months, Hanhua Financial Holding shareholders did even worse, losing 34%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 9% per year over five years. 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. 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. For example, we've discovered 3 warning signs for Hanhua Financial Holding (1 shouldn't be ignored!) that you should be aware of before investing here.

But note: Hanhua Financial Holding may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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