Vitasoy International Holdings (HKG:345) sheds HK$504m, company earnings and investor returns have been trending downwards for past five years

Some stocks are best avoided. We don't wish catastrophic capital loss on anyone. Imagine if you held Vitasoy International Holdings Limited (HKG:345) for half a decade as the share price tanked 85%. And it's not just long term holders hurting, because the stock is down 60% in the last year. The falls have accelerated recently, with the share price down 20% in the last three months. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

With the stock having lost 7.2% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

See our latest analysis for Vitasoy International 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 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.

Vitasoy International Holdings became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.

The modest 0.5% dividend yield is unlikely to be guiding the market view of the stock. It could be that the revenue decline of 4.3% per year is viewed as evidence that Vitasoy International Holdings is shrinking. That could explain the weak share price.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

While the broader market lost about 9.9% in the twelve months, Vitasoy International Holdings shareholders did even worse, losing 60% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 13% per year over five years. 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. 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 be aware of the 1 warning sign we've spotted with Vitasoy International Holdings .

Vitasoy International Holdings 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 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.