While it may not be enough for some shareholders, we think it is good to see the Greentown Service Group Co. Ltd. (HKG:2869) share price up 13% in a single quarter. But only the myopic could ignore the astounding decline over three years. The share price has sunk like a leaky ship, down 72% in that time. So it's about time shareholders saw some gains. Only time will tell if the company can sustain the turnaround.

On a more encouraging note the company has added HK$475m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

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. 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.

During the three years that the share price fell, Greentown Service Group's earnings per share (EPS) dropped by 6.4% each year. This reduction in EPS is slower than the 35% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.

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

We know that Greentown Service Group has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

A Different Perspective

While the broader market lost about 7.4% in the twelve months, Greentown Service Group shareholders did even worse, losing 38% (even including dividends). 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 8% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Even so, be aware that Greentown Service Group is showing 2 warning signs in our investment analysis , you should know about...

Of course Greentown Service Group 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 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.