As an investor, mistakes are inevitable. But really big losses can really drag down an overall portfolio. So take a moment to sympathize with the long term shareholders of Guangzhou Kingmed Diagnostics Group Co., Ltd. (SHSE:603882), who have seen the share price tank a massive 72% over a three year period. That would certainly shake our confidence in the decision to own the stock. The more recent news is of little comfort, with the share price down 52% in a year. Unfortunately the share price momentum is still quite negative, with prices down 30% in thirty days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
Since Guangzhou Kingmed Diagnostics Group has shed CN¥1.8b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
Guangzhou Kingmed Diagnostics Group saw its EPS decline at a compound rate of 38% per year, over the last three years. This fall in EPS isn't far from the rate of share price decline, which was 35% per year. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. In this case, it seems that the EPS is guiding the share price.
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 Guangzhou Kingmed Diagnostics Group's key metrics by checking this interactive graph of Guangzhou Kingmed Diagnostics Group's earnings, revenue and cash flow.
A Different Perspective
While the broader market lost about 12% in the twelve months, Guangzhou Kingmed Diagnostics Group shareholders did even worse, losing 51% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 3% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Guangzhou Kingmed Diagnostics Group better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Guangzhou Kingmed Diagnostics Group you should be aware of.
But note: Guangzhou Kingmed Diagnostics Group 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 Chinese 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.