If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. Long term Hangzhou DPtech Technologies Co.,Ltd. (SZSE:300768) shareholders know that all too well, since the share price is down considerably over three years. Sadly for them, the share price is down 53% in that time. And more recent buyers are having a tough time too, with a drop of 37% in the last year. More recently, the share price has dropped a further 10% in a month. However, we note the price may have been impacted by the broader market, which is down 5.8% in the same time period.
If the past week is anything to go by, investor sentiment for Hangzhou DPtech TechnologiesLtd isn't positive, so let's see if there's a mismatch between fundamentals and the share price.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.
Hangzhou DPtech TechnologiesLtd saw its EPS decline at a compound rate of 24% per year, over the last three years. This fall in EPS isn't far from the rate of share price decline, which was 22% per year. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. In this case, it seems that the EPS is guiding the share price.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
A Different Perspective
While the broader market lost about 12% in the twelve months, Hangzhou DPtech TechnologiesLtd shareholders did even worse, losing 36% (even including dividends). 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 8% 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. Is Hangzhou DPtech TechnologiesLtd cheap compared to other companies? These 3 valuation measures might help you decide.
Of course Hangzhou DPtech TechnologiesLtd 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.