Every investor on earth makes bad calls sometimes. But you have a problem if you face massive losses more than once in a while. So consider, for a moment, the misfortune of Jiangxi Bank Co., Ltd. (HKG:1916) investors who have held the stock for three years as it declined a whopping 79%. That would be a disturbing experience. And more recent buyers are having a tough time too, with a drop of 60% in the last year. Shareholders have had an even rougher run lately, with the share price down 47% in the last 90 days.

If the past week is anything to go by, investor sentiment for Jiangxi Bank isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for Jiangxi Bank

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 three years that the share price fell, Jiangxi Bank's earnings per share (EPS) dropped by 12% each year. This reduction in EPS is slower than the 41% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy. The less favorable sentiment is reflected in its current P/E ratio of 3.19.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

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

A Different Perspective

The last twelve months weren't great for Jiangxi Bank shares, which performed worse than the market, costing holders 59%, including dividends. The market shed around 24%, no doubt weighing on the stock price. The three-year loss of 21% 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. 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. 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. Take risks, for example - Jiangxi Bank has 4 warning signs (and 2 which shouldn't be ignored) we think you should know about.

Of course Jiangxi Bank 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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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.