Many investors define successful investing as beating the market average over the long term. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term China ZhongDi Dairy Holdings Company Limited (HKG:1492) shareholders have had that experience, with the share price dropping 44% in three years, versus a market return of about 21%. Unfortunately the share price momentum is still quite negative, with prices down 9.3% in thirty days.

Check out our latest analysis for China ZhongDi Dairy Holdings

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

During the three years that the share price fell, China ZhongDi Dairy Holdings's earnings per share (EPS) dropped by 20% each year. This change in EPS is reasonably close to the 18% average annual decrease in the share price. 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).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

The last twelve months weren't great for China ZhongDi Dairy Holdings shares, which cost holders 19%, while the market was up about 2.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The three-year loss of 18% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. Is China ZhongDi Dairy Holdings cheap compared to other companies? These 3 valuation measures might help you decide.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.