Kangda International Environmental (HKG:6136) sheds HK$56m, company earnings and investor returns have been trending downwards for past five years

We're definitely into long term investing, but some companies are simply bad investments over any time frame. It hits us in the gut when we see fellow investors suffer a loss. Anyone who held Kangda International Environmental Company Limited (HKG:6136) for five years would be nursing their metaphorical wounds since the share price dropped 79% in that time. And we doubt long term believers are the only worried holders, since the stock price has declined 46% over the last twelve months. Furthermore, it's down 18% in about a quarter. That's not much fun for holders.

After losing 11% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

See our latest analysis for Kangda International Environmental

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the five years over which the share price declined, Kangda International Environmental's earnings per share (EPS) dropped by 17% each year. This reduction in EPS is less than the 27% annual reduction in the share price. So it seems the market was too confident about the business, in the past. The low P/E ratio of 3.29 further reflects this reticence.

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

Dive deeper into Kangda International Environmental's key metrics by checking this interactive graph of Kangda International Environmental's earnings, revenue and cash flow.

A Different Perspective

While the broader market gained around 3.1% in the last year, Kangda International Environmental shareholders lost 46%. 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 12% 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. 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 Kangda International Environmental is showing 4 warning signs in our investment analysis , and 2 of those can't be ignored...

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.

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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