Investors three-year losses continue as China Modern Dairy Holdings (HKG:1117) dips a further 7.1% this week, earnings continue to decline

If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But the last three years have been particularly tough on longer term China Modern Dairy Holdings Ltd. (HKG:1117) shareholders. Regrettably, they have had to cope with a 66% drop in the share price over that period. And over the last year the share price fell 36%, so we doubt many shareholders are delighted. The falls have accelerated recently, with the share price down 12% in the last three months. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.

Since China Modern Dairy Holdings has shed HK$396m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for China Modern Dairy Holdings

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 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 three years that the share price fell, China Modern Dairy Holdings' earnings per share (EPS) dropped by 43% each year. This fall in the EPS is worse than the 30% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.

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

This free interactive report on China Modern Dairy Holdings' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

We regret to report that China Modern Dairy Holdings shareholders are down 34% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 9.9%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand China Modern Dairy Holdings better, we need to consider many other factors. For instance, we've identified 3 warning signs for China Modern Dairy Holdings that you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.