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As an investor, mistakes are inevitable. But you have a problem if you face massive losses more than once in a while. So spare a thought for the long term shareholders of Zhejiang Tengy Environmental Technology Co., Ltd (HKG:1527); the share price is down a whopping 75% in the last three years. That would certainly shake our confidence in the decision to own the stock. And the ride hasn't got any smoother in recent times over the last year, with the price 56% lower in that time. The falls have accelerated recently, with the share price down 30% in the last three months.
View our latest analysis for Zhejiang Tengy Environmental Technology
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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, Zhejiang Tengy Environmental Technology's earnings per share (EPS) dropped by 42% each year. This fall in EPS isn't far from the rate of share price decline, which was 37% per year. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. Rather, the share price has approximately tracked EPS growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on Zhejiang Tengy Environmental Technology's earnings, revenue and cash flow.
A Different Perspective
The last twelve months weren't great for Zhejiang Tengy Environmental Technology shares, which cost holders 56%, while the market was up about 4.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The three-year loss of 37% 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. Before forming an opinion on Zhejiang Tengy Environmental Technology you might want to consider these 3 valuation metrics.