Further weakness as Da Ming International Holdings (HKG:1090) drops 12% this week, taking three-year losses to 47%

For many investors, the main point of stock picking is to generate higher returns than the overall market. But the risk of stock picking is that you will likely buy under-performing companies. Unfortunately, that's been the case for longer term Da Ming International Holdings Limited (HKG:1090) shareholders, since the share price is down 50% in the last three years, falling well short of the market decline of around 18%. And the ride hasn't got any smoother in recent times over the last year, with the price 34% lower in that time. Shareholders have had an even rougher run lately, with the share price down 24% in the last 90 days.

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.

See our latest analysis for Da Ming International Holdings

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Over the three years that the share price declined, Da Ming International Holdings' earnings per share (EPS) dropped significantly, falling to a loss. Due to the loss, it's not easy to use EPS as a reliable guide to the business. However, we can say we'd expect to see a falling share price in this scenario.

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 Da Ming International Holdings' earnings, revenue and cash flow.

What About The Total Shareholder Return (TSR)?

We've already covered Da Ming International Holdings' share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Da Ming International Holdings' TSR, which was a 47% drop over the last 3 years, was not as bad as the share price return.

A Different Perspective

We regret to report that Da Ming International Holdings shareholders are down 34% for the year. Unfortunately, that's worse than the broader market decline of 2.6%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 7% 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. 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. Case in point: We've spotted 2 warning signs for Da Ming International Holdings you should be aware of.

If you are like me, then you will not want to miss this free list of growing companies that insiders are 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.