Earnings are growing at Zheneng Jinjiang Environment Holding (SGX:BWM) but shareholders still don't like its prospects

If you love investing in stocks you're bound to buy some losers. But the long term shareholders of Zheneng Jinjiang Environment Holding Company Limited (SGX:BWM) have had an unfortunate run in the last three years. Regrettably, they have had to cope with a 65% drop in the share price over that period. And more recent buyers are having a tough time too, with a drop of 40% in the last year. And the share price decline continued over the last week, dropping some 17%.

Since Zheneng Jinjiang Environment Holding has shed S$73m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Zheneng Jinjiang Environment Holding

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.

Although the share price is down over three years, Zheneng Jinjiang Environment Holding actually managed to grow EPS by 863% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or else the company was over-hyped in the past, and so its growth has disappointed.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

Revenue is actually up 9.6% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating Zheneng Jinjiang Environment Holding further; while we may be missing something on this analysis, there might also be an opportunity.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Take a more thorough look at Zheneng Jinjiang Environment Holding's financial health with this free report on its balance sheet.

A Different Perspective

While the broader market lost about 1.3% in the twelve months, Zheneng Jinjiang Environment Holding shareholders did even worse, losing 40%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 10% over the last half decade. 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. For example, we've discovered 4 warning signs for Zheneng Jinjiang Environment Holding (3 shouldn't be ignored!) that you should be aware of before investing here.

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 Singaporean 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.