Statistically speaking, long term investing is a profitable endeavour. But along the way some stocks are going to perform badly. Zooming in on an example, the Qingdao Topscomm Communication INC. (SHSE:603421) share price dropped 55% in the last half decade. That's not a lot of fun for true believers. And it's not just long term holders hurting, because the stock is down 29% in the last year. Shareholders have had an even rougher run lately, with the share price down 29% in the last 90 days. Of course, this share price action may well have been influenced by the 12% decline in the broader market, throughout the period.

While the last five years has been tough for Qingdao Topscomm Communication shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the five years over which the share price declined, Qingdao Topscomm Communication's earnings per share (EPS) dropped by 19% each year. The share price decline of 15% per year isn't as bad as the EPS decline. So the market may previously have expected a drop, or else it expects the situation will improve. With a P/E ratio of 48.78, it's fair to say the market sees a brighter future for the business.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It might be well worthwhile taking a look at our free report on Qingdao Topscomm Communication's earnings, revenue and cash flow.

A Different Perspective

We regret to report that Qingdao Topscomm Communication shareholders are down 28% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 21%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 9% per year over five years. 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 Qingdao Topscomm Communication better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Qingdao Topscomm Communication you should be aware of, and 1 of them doesn't sit too well with us.

Of course Qingdao Topscomm Communication 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.