The three-year shareholder returns and company earnings persist lower as Hopson Development Holdings (HKG:754) stock falls a further 6.7% in past week

As every investor would know, not every swing hits the sweet spot. But you want to avoid the really big losses like the plague. So consider, for a moment, the misfortune of Hopson Development Holdings Limited (HKG:754) investors who have held the stock for three years as it declined a whopping 82%. That would certainly shake our confidence in the decision to own the stock. And over the last year the share price fell 23%, so we doubt many shareholders are delighted. And the share price decline continued over the last week, dropping some 6.7%. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

With the stock having lost 6.7% 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 Hopson Development Holdings

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Hopson Development Holdings saw its EPS decline at a compound rate of 40% per year, over the last three years. This change in EPS is reasonably close to the 44% average annual decrease in the share price. So it seems like sentiment towards the stock hasn't changed all that much over time. In this case, it seems that the EPS is guiding the share price.

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

Dive deeper into Hopson Development Holdings' key metrics by checking this interactive graph of Hopson Development Holdings's earnings, revenue and cash flow.

A Different Perspective

Investors in Hopson Development Holdings had a tough year, with a total loss of 23%, against a market gain of about 10.0%. 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. On the bright side, long term shareholders have made money, with a gain of 1.2% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Take risks, for example - Hopson Development Holdings has 4 warning signs (and 2 which make us uncomfortable) we think 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.