The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the long term shareholders of Hainan Mining Co., Ltd. (SHSE:601969) have had an unfortunate run in the last three years. So they might be feeling emotional about the 55% share price collapse, in that time. Furthermore, it's down 19% in about a quarter. That's not much fun for holders.

Since Hainan Mining has shed CN¥557m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the unfortunate three years of share price decline, Hainan Mining actually saw its earnings per share (EPS) improve by 27% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.

Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

With a rather small yield of just 1.6% we doubt that the stock's share price is based on its dividend. We note that, in three years, revenue has actually grown at a 11% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating Hainan Mining further; while we may be missing something on this analysis, there might also be an opportunity.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We know that Hainan Mining has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Hainan Mining will earn in the future (free profit forecasts).

A Different Perspective

While it's never nice to take a loss, Hainan Mining shareholders can take comfort that , including dividends,their trailing twelve month loss of 8.3% wasn't as bad as the market loss of around 17%. Longer term investors wouldn't be so upset, since they would have made 0.3%, each year, over five years. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. 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. Even so, be aware that Hainan Mining is showing 1 warning sign in our investment analysis , you should know about...

But note: Hainan Mining 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.

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