CNFinance Holdings' (NYSE:CNF) earnings trajectory could turn positive as the stock surges 28% this past week

It's nice to see the CNFinance Holdings Limited (NYSE:CNF) share price up 28% in a week. But spare a thought for the long term holders, who have held the stock as it bled value over the last five years. In fact, the share price has tumbled down a mountain to land 77% lower after that period. The recent bounce might mean the long decline is over, but we are not confident. The million dollar question is whether the company can justify a long term recovery.

While the last five years has been tough for CNFinance Holdings shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

Check out our latest analysis for CNFinance Holdings

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Looking back five years, both CNFinance Holdings' share price and EPS declined; the latter at a rate of 31% per year. This fall in the EPS is worse than the 25% compound annual share price fall. So investors might expect EPS to bounce back -- or they may have previously foreseen the EPS decline.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It might be well worthwhile taking a look at our free report on CNFinance Holdings' earnings, revenue and cash flow.

A Different Perspective

While the broader market gained around 36% in the last year, CNFinance Holdings shareholders lost 68%. 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 12% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with CNFinance Holdings (at least 2 which are significant) , and understanding them should be part of your investment process.

But note: CNFinance Holdings may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.