Statistically speaking, long term investing is a profitable endeavour. But that doesn't mean long term investors can avoid big losses. For example the Hangzhou Shunwang Technology Co,Ltd (SZSE:300113) share price dropped 54% over five years. That's an unpleasant experience for long term holders. On top of that, the share price is down 20% in the last week.

Since Hangzhou Shunwang Technology CoLtd has shed CN¥2.4b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).

Hangzhou Shunwang Technology CoLtd 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 may better explain the share price move.

The modest 0.6% dividend yield is unlikely to be guiding the market view of the stock. Revenue is actually up 2.2% over the time period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

We know that Hangzhou Shunwang Technology CoLtd has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Hangzhou Shunwang Technology CoLtd will earn in the future (free profit forecasts).

A Different Perspective

Hangzhou Shunwang Technology CoLtd shareholders are up 3.7% for the year (even including dividends). Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 9% endured over half a decade. It could well be that the business is stabilizing. It's always interesting to track share price performance over the longer term. But to understand Hangzhou Shunwang Technology CoLtd better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Hangzhou Shunwang Technology CoLtd , and understanding them should be part of your investment process.

We will like Hangzhou Shunwang Technology CoLtd better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.