Investing in stocks comes with the risk that the share price will fall. Unfortunately, shareholders of Zhongsheng Group Holdings Limited (HKG:881) have suffered share price declines over the last year. In that relatively short period, the share price has plunged 67%. Even if you look out three years, the returns are still disappointing, with the share price down67% in that time. Shareholders have had an even rougher run lately, with the share price down 19% in the last 90 days. Of course, this share price action may well have been influenced by the 8.6% decline in the broader market, throughout the period.

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

View our latest analysis for Zhongsheng Group Holdings

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Unhappily, Zhongsheng Group Holdings had to report a 23% decline in EPS over the last year. The share price decline of 67% is actually more than the EPS drop. This suggests the EPS fall has made some shareholders are more nervous about the business. The P/E ratio of 5.56 also points to the negative market sentiment.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

We regret to report that Zhongsheng Group Holdings shareholders are down 66% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 16%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 3%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. For instance, we've identified 1 warning sign for Zhongsheng Group Holdings that you should be aware of.

Zhongsheng Group Holdings is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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