The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the long term shareholders of IMAX China Holding, Inc. (HKG:1970) have had an unfortunate run in the last three years. Regrettably, they have had to cope with a 67% drop in the share price over that period. And the ride hasn't got any smoother in recent times over the last year, with the price 40% lower in that time. Furthermore, it's down 25% in about a quarter. That's not much fun for holders.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.
Although the share price is down over three years, IMAX China Holding actually managed to grow EPS by 6.3% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.
Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
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).
IMAX China Holding is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for IMAX China Holding in this interactive graph of future profit estimates.
A Different Perspective
The last twelve months weren't great for IMAX China Holding shares, which performed worse than the market, costing holders 39% , including dividends . Meanwhile, the broader market slid about 8.8%, likely weighing on the stock. Shareholders have lost 30% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. It's always interesting to track share price performance over the longer term. But to understand IMAX China Holding better, we need to consider many other factors. Even so, be aware that IMAX China Holding is showing 2 warning signs in our investment analysis , you should know about...
Of course IMAX China Holding 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 HK exchanges.
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