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We're definitely into long term investing, but some companies are simply bad investments over any time frame. We don't wish catastrophic capital loss on anyone. Spare a thought for those who held First Shanghai Investments Limited (HKG:227) for five whole years - as the share price tanked 82%. The falls have accelerated recently, with the share price down 12% in the last three months.
We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
View our latest analysis for First Shanghai Investments
There is no denying that markets are sometimes efficient, but prices do not always reflect 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).
First Shanghai Investments became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.
The revenue decline of 2.0% isn't too bad. But it's quite possible the market had expected better; a closer look at the revenue trends might explain the pessimism.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
This free interactive report on First Shanghai Investments's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
While the broader market lost about 2.4% in the twelve months, First Shanghai Investments shareholders did even worse, losing 20%. 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. Unfortunately, longer term shareholders are suffering worse, given the loss of 29% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
But note: First Shanghai Investments 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).