The past three-year earnings decline for Hopson Development Holdings (HKG:754) likely explains shareholders long-term losses

If you love investing in stocks you're bound to buy some losers. But long term Hopson Development Holdings Limited (HKG:754) shareholders have had a particularly rough ride in the last three year. Sadly for them, the share price is down 60% in that time. But it's up 5.2% in the last week.

While the stock has risen 5.2% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

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There is no denying that markets are sometimes efficient, but prices do not always reflect 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, Hopson Development Holdings' earnings per share (EPS) dropped by 77% each year. In comparison the 26% compound annual share price decline isn't as bad as the EPS drop-off. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term. This positive sentiment is also reflected in the generous P/E ratio of 96.41.

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 Hopson Development Holdings' 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 gained around 26% in the last year, Hopson Development Holdings shareholders lost 20%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6% 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. Even so, be aware that Hopson Development Holdings is showing 3 warning signs in our investment analysis , and 2 of those shouldn't be ignored...

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.