Generally speaking long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. For example the STO Express Co.,Ltd (SZSE:002468) share price dropped 56% over five years. We certainly feel for shareholders who bought near the top. And it's not just long term holders hurting, because the stock is down 24% in the last year. Furthermore, it's down 26% in about a quarter. That's not much fun for holders.

With the stock having lost 3.5% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

View our latest analysis for STO ExpressLtd

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 five years of share price growth, STO ExpressLtd moved from a loss to profitability. 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.

In contrast to the share price, revenue has actually increased by 16% a year in the five year 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).

STO ExpressLtd is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for STO ExpressLtd in this interactive graph of future profit estimates.

A Different Perspective

While the broader market lost about 13% in the twelve months, STO ExpressLtd shareholders did even worse, losing 24%. 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, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 9% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand STO ExpressLtd 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 STO ExpressLtd , and understanding them should be part of your investment process.

Of course STO ExpressLtd 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.