Nan Ya Plastics (TWSE:1303) shareholders have lost 62% over 3 years, earnings decline likely the culprit

Investing in stocks inevitably means buying into some companies that perform poorly. But the long term shareholders of Nan Ya Plastics Corporation (TWSE:1303) have had an unfortunate run in the last three years. Sadly for them, the share price is down 67% in that time. And the ride hasn't got any smoother in recent times over the last year, with the price 55% lower in that time. Furthermore, it's down 33% in about a quarter. That's not much fun for holders.

After losing 8.2% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

Check out our latest analysis for Nan Ya Plastics

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

Nan Ya Plastics saw its EPS decline at a compound rate of 65% per year, over the last three years. In comparison the 31% compound annual share price decline isn't as bad as the EPS drop-off. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term. With a P/E ratio of 71.50, it's fair to say the market sees a brighter future for the business.

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

This free interactive report on Nan Ya Plastics' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Nan Ya Plastics, it has a TSR of -62% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Investors in Nan Ya Plastics had a tough year, with a total loss of 54% (including dividends), against a market gain of about 29%. 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 9% 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. Case in point: We've spotted 2 warning signs for Nan Ya Plastics you should be aware of.

We will like Nan Ya Plastics 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 Taiwanese 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.