Shengjing Bank Co., Ltd. (HKG:2066) shareholders should be happy to see the share price up 16% in the last quarter. But that doesn't change the fact that the returns over the last three years have been stomach churning. To wit, the share price sky-dived 85% in that time. So we're relieved for long term holders to see a bit of uplift. Of course the real question is whether the business can sustain a turnaround. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

The recent uptick of 7.5% could be a positive sign of things to come, so let's take a look at historical fundamentals.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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, Shengjing Bank's earnings per share (EPS) dropped by 15% each year. This reduction in EPS is slower than the 47% 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 11.09.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

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

A Different Perspective

We regret to report that Shengjing Bank shareholders are down 83% for the year. Unfortunately, that's worse than the broader market decline of 9.9%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 12% 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. It's always interesting to track share price performance over the longer term. But to understand Shengjing Bank better, we need to consider many other factors. Take risks, for example - Shengjing Bank has 2 warning signs (and 1 which is significant) we think you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.