Frontage Holdings (HKG:1521) sheds HK$182m, company earnings and investor returns have been trending downwards for past three years

It's not possible to invest over long periods without making some bad investments. But you have a problem if you face massive losses more than once in a while. So take a moment to sympathize with the long term shareholders of Frontage Holdings Corporation (HKG:1521), who have seen the share price tank a massive 88% over a three year period. That would certainly shake our confidence in the decision to own the stock. And more recent buyers are having a tough time too, with a drop of 72% in the last year. Shareholders have had an even rougher run lately, with the share price down 46% in the last 90 days. While a drop like that is definitely a body blow, money isn't as important as health and happiness.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

See our latest analysis for Frontage Holdings

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Frontage Holdings saw its EPS decline at a compound rate of 14% per year, over the last three years. The share price decline of 50% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

While the broader market gained around 8.3% in the last year, Frontage Holdings shareholders lost 72%. 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 13% 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. 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. Even so, be aware that Frontage Holdings is showing 2 warning signs in our investment analysis , you should know about...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.