Statistically speaking, long term investing is a profitable endeavour. But no-one is immune from buying too high. For example the Bank of Zhengzhou Co., Ltd. (HKG:6196) share price dropped 63% over five years. That's not a lot of fun for true believers.

Since Bank of Zhengzhou has shed CN¥413m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out our latest analysis for Bank of Zhengzhou

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).

Looking back five years, both Bank of Zhengzhou's share price and EPS declined; the latter at a rate of 8.4% per year. This reduction in EPS is less than the 18% annual reduction in the share price. This implies that the market is more cautious about the business these days. The low P/E ratio of 3.49 further reflects this reticence.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We consider it positive that insiders have made significant purchases in the last year. 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..

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Bank of Zhengzhou's total shareholder return (TSR) and its share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Dividends have been really beneficial for Bank of Zhengzhou shareholders, and that cash payout explains why its total shareholder loss of 59%, over the last 5 years, isn't as bad as the share price return.

A Different Perspective

While it's never nice to take a loss, Bank of Zhengzhou shareholders can take comfort that their trailing twelve month loss of 17% wasn't as bad as the market loss of around 19%. Given the total loss of 10% per year over five years, it seems returns have deteriorated in the last twelve months. Whilst Baron Rothschild does tell the investor "buy when there's blood in the streets, even if the blood is your own", buyers would need to examine the data carefully to be comfortable that the business itself is sound. 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. To that end, you should be aware of the 2 warning signs we've spotted with Bank of Zhengzhou .

There are plenty of other companies that have insiders buying up shares. You probably do 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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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.