Chinasoft International (HKG:354) sheds HK$626m, company earnings and investor returns have been trending downwards for past three years

As an investor, mistakes are inevitable. But really big losses can really drag down an overall portfolio. So spare a thought for the long term shareholders of Chinasoft International Limited (HKG:354); the share price is down a whopping 76% in the last three years. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. And more recent buyers are having a tough time too, with a drop of 24% in the last year. Shareholders have had an even rougher run lately, with the share price down 28% in the last 90 days.

If the past week is anything to go by, investor sentiment for Chinasoft International isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for Chinasoft International

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Chinasoft International saw its EPS decline at a compound rate of 9.1% per year, over the last three years. This reduction in EPS is slower than the 37% annual reduction in the share price. So it seems the market was too confident about the business, in the past. The less favorable sentiment is reflected in its current P/E ratio of 11.34.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It might be well worthwhile taking a look at our free report on Chinasoft International's earnings, revenue and cash flow.

A Different Perspective

While the broader market lost about 2.5% in the twelve months, Chinasoft International shareholders did even worse, losing 22% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 0.6% 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. Before deciding if you like the current share price, check how Chinasoft International scores on these 3 valuation metrics.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.

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