Even the best investor on earth makes unsuccessful investments. But it's not unreasonable to try to avoid truly shocking capital losses. So spare a thought for the long term shareholders of Essence Information Technology Co., Ltd. (SHSE:688555); the share price is down a whopping 70% in the last twelve months. That'd be enough to make even the strongest stomachs churn. Essence Information Technology hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. Furthermore, it's down 42% in about a quarter. That's not much fun for holders.

If the past week is anything to go by, investor sentiment for Essence Information Technology isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for Essence Information Technology

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 last year Essence Information Technology saw its earnings per share drop below zero. Some investors no doubt dumped the stock as a result. However, there may be an opportunity for investors if the company can recover.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

Dive deeper into Essence Information Technology's key metrics by checking this interactive graph of Essence Information Technology's earnings, revenue and cash flow.

A Different Perspective

Essence Information Technology shareholders are down 70% for the year, even worse than the market loss of 18%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. With the stock down 42% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. It's always interesting to track share price performance over the longer term. But to understand Essence Information Technology better, we need to consider many other factors. For instance, we've identified 3 warning signs for Essence Information Technology (2 can't be ignored) that you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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