The three-year underlying earnings growth at eCloudvalley Digital Technology (TWSE:6689) is promising, but the shareholders are still in the red over that time

The truth is that if you invest for long enough, you're going to end up with some losing stocks. But long term eCloudvalley Digital Technology Co., Ltd. (TWSE:6689) shareholders have had a particularly rough ride in the last three year. So they might be feeling emotional about the 56% share price collapse, in that time. The more recent news is of little comfort, with the share price down 35% in a year. Shareholders have had an even rougher run lately, with the share price down 25% in the last 90 days.

Since eCloudvalley Digital Technology has shed NT$888m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for eCloudvalley Digital Technology

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the unfortunate three years of share price decline, eCloudvalley Digital Technology actually saw its earnings per share (EPS) improve by 2.3% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.

After considering the numbers, we'd posit that the the market had higher expectations of EPS growth, three years back. However, taking a look at other business metrics might shed a bit more light on the share price action.

The company has kept revenue pretty healthy over the last three years, so we doubt that explains the falling share price. We're not entirely sure why the share price is dropped, but it does seem likely investors have become less optimistic about the business.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We know that eCloudvalley Digital Technology has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for eCloudvalley Digital Technology in this interactive graph of future profit estimates.

A Different Perspective

While the broader market gained around 36% in the last year, eCloudvalley Digital Technology shareholders lost 34% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% 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. It's always interesting to track share price performance over the longer term. But to understand eCloudvalley Digital Technology better, we need to consider many other factors. Take risks, for example - eCloudvalley Digital Technology has 1 warning sign we think you should be aware of.

Of course eCloudvalley Digital Technology may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.