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The truth is that if you invest for long enough, you're going to end up with some losing stocks. Long term Beijing Gas Blue Sky Holdings Limited (HKG:6828) shareholders know that all too well, since the share price is down considerably over three years. Regrettably, they have had to cope with a 69% drop in the share price over that period. The more recent news is of little comfort, with the share price down 60% in a year. Unhappily, the share price slid 1.5% in the last week.
See our latest analysis for Beijing Gas Blue Sky Holdings
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. 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 unfortunate three years of share price decline, Beijing Gas Blue Sky Holdings actually saw its earnings per share (EPS) improve by 53% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.
Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
Revenue is actually up 56% over the three years, so the share price drop doesn't seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching Beijing Gas Blue Sky Holdings more closely, as sometimes stocks fall unfairly. This could present an opportunity.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
While the broader market gained around 5.4% in the last year, Beijing Gas Blue Sky Holdings shareholders lost 60%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 13% per year over five years. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Beijing Gas Blue Sky Holdings by clicking this link.