If you love investing in stocks you're bound to buy some losers. But the long term shareholders of Ningbo Peacebird Fashion Co.,Ltd. (SHSE:603877) have had an unfortunate run in the last three years. Regrettably, they have had to cope with a 63% drop in the share price over that period. Shareholders have had an even rougher run lately, with the share price down 27% in the last 90 days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

Since Ningbo Peacebird FashionLtd has shed CN¥711m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for Ningbo Peacebird FashionLtd

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).

During the three years that the share price fell, Ningbo Peacebird FashionLtd's earnings per share (EPS) dropped by 28% each year. The 28% average annual share price decline is remarkably close to the EPS decline. That suggests that the market sentiment around the company hasn't changed much over that time, despite the disappointment. It seems like the share price is reflecting the declining earnings per share.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Dive deeper into Ningbo Peacebird FashionLtd's key metrics by checking this interactive graph of Ningbo Peacebird FashionLtd's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Ningbo Peacebird FashionLtd the TSR over the last 3 years was -61%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market gained around 0.7% in the last year, Ningbo Peacebird FashionLtd shareholders lost 3.9% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.9% per year over five years. We realise that Baron Rothschild 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 business. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Ningbo Peacebird FashionLtd you should know about.

Of course Ningbo Peacebird FashionLtd may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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