It is a pleasure to report that the Espressif Systems (Shanghai) Co., Ltd. (SHSE:688018) is up 33% in the last quarter. But that doesn't change the fact that the returns over the last three years haven't been great. Specifically, the stock price is down 35% whereas the market is down , having returned (-31%).

If the past week is anything to go by, investor sentiment for Espressif Systems (Shanghai) isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Although the share price is down over three years, Espressif Systems (Shanghai) actually managed to grow EPS by 9.6% 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). Or else the company was over-hyped in the past, and so its growth has disappointed.

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

With a rather small yield of just 0.7% 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 6.8% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating Espressif Systems (Shanghai) 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 Espressif Systems (Shanghai) has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling Espressif Systems (Shanghai) stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

We're pleased to report that Espressif Systems (Shanghai) shareholders have received a total shareholder return of 21% over one year. Of course, that includes the dividend. Notably the five-year annualised TSR loss of 3% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand Espressif Systems (Shanghai) better, we need to consider many other factors. For example, we've discovered 1 warning sign for Espressif Systems (Shanghai) that you should be aware of before investing here.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.