It's not possible to invest over long periods without making some bad investments. But really big losses can really drag down an overall portfolio. So spare a thought for the long term shareholders of Shun Wo Group Holdings Limited (HKG:1591); the share price is down a whopping 74% in the last three years. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. The more recent news is of little comfort, with the share price down 60% in a year. Shareholders have had an even rougher run lately, with the share price down 34% in the last 90 days.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Over the three years that the share price declined, Shun Wo Group Holdings's earnings per share (EPS) dropped significantly, falling to a loss. Due to the loss, it's not easy to use EPS as a reliable guide to the business. But it's safe to say we'd generally expect the share price to be lower as a result!
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Dive deeper into Shun Wo Group Holdings's key metrics by checking this interactive graph of Shun Wo Group Holdings's earnings, revenue and cash flow.
A Different Perspective
The last twelve months weren't great for Shun Wo Group Holdings shares, which performed worse than the market, costing holders 60%. Meanwhile, the broader market slid about 5.5%, likely weighing on the stock. The three-year loss of 36% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
If you are like me, then you will not want to miss this free list of growing companies 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 HK exchanges.
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