Every investor on earth makes bad calls sometimes. But really bad investments should be rare. So take a moment to sympathize with the long term shareholders of Jinxin Fertility Group Limited (HKG:1951), who have seen the share price tank a massive 82% over a three year period. That would be a disturbing experience. The more recent news is of little comfort, with the share price down 37% in a year. More recently, the share price has dropped a further 8.4% in a month. We do note, however, that the broader market is down 8.0% in that period, and this may have weighed on the share price. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

While the last three years has been tough for Jinxin Fertility Group 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 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).

Although the share price is down over three years, Jinxin Fertility Group actually managed to grow EPS by 6.2% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

Revenue is actually up 22% 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 Jinxin Fertility Group more closely, as sometimes stocks fall unfairly. This could present an opportunity.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

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. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

We regret to report that Jinxin Fertility Group shareholders are down 35% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 2.5%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 11% over the last half decade. 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. 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 Jinxin Fertility Group by clicking this link.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com