The five-year shareholder returns and company earnings persist lower as China Display Optoelectronics Technology Holdings (HKG:334) stock falls a further 21% in past week

Generally speaking long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. For example, after five long years the China Display Optoelectronics Technology Holdings Limited (HKG:334) share price is a whole 67% lower. That is extremely sub-optimal, to say the least. We also note that the stock has performed poorly over the last year, with the share price down 43%. The last week also saw the share price slip down another 21%.

With the stock having lost 21% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for China Display Optoelectronics Technology Holdings

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.

During the five years over which the share price declined, China Display Optoelectronics Technology Holdings' earnings per share (EPS) dropped by 31% each year. The share price decline of 20% per year isn't as bad as the EPS decline. So the market may previously have expected a drop, or else it expects the situation will improve.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

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

A Different Perspective

China Display Optoelectronics Technology Holdings shareholders are down 43% for the year, but the market itself is up 2.8%. 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 11% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Take risks, for example - China Display Optoelectronics Technology Holdings has 3 warning signs we think you should be aware of.

We will like China Display Optoelectronics Technology Holdings better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider 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.

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.