If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But the long term shareholders of Piesat Information Technology Co., Ltd. (SHSE:688066) have had an unfortunate run in the last three years. So they might be feeling emotional about the 60% share price collapse, in that time. And over the last year the share price fell 40%, so we doubt many shareholders are delighted. Unfortunately the share price momentum is still quite negative, with prices down 25% in thirty days.

Since Piesat Information Technology has shed CN¥601m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Piesat Information Technology saw its share price decline over the three years in which its EPS also dropped, falling to a loss. Due to the loss, it's not easy to use EPS as a reliable guide to the business. But it's safe to say we'd generally expect the share price to be lower as a result!

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

This free interactive report on Piesat Information Technology's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Piesat Information Technology shareholders are down 40% for the year, but the market itself is up 6.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 7% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Piesat Information Technology you should know about.

But note: Piesat Information Technology may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.