Investing in stocks inevitably means buying into some companies that perform poorly. But the long term shareholders of Jiangsu New Energy Development Co., Ltd. (SHSE:603693) have had an unfortunate run in the last three years. So they might be feeling emotional about the 56% share price collapse, in that time.

After losing 4.6% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the unfortunate three years of share price decline, Jiangsu New Energy Development actually saw its earnings per share (EPS) improve by 37% per year. 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.

The modest 1.5% dividend yield is unlikely to be guiding the market view of the stock. We note that, in three years, revenue has actually grown at a 3.0% annual rate, so that doesn't seem to be a reason to sell shares. This analysis is just perfunctory, but it might be worth researching Jiangsu New Energy Development more closely, as sometimes stocks fall unfairly. This could present an opportunity.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

This free interactive report on Jiangsu New Energy Development's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Jiangsu New Energy Development shareholders are down 12% for the year (even including dividends), but the market itself is up 8.9%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 7%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Jiangsu New Energy Development better, we need to consider many other factors. Take risks, for example - Jiangsu New Energy Development has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.

Of course Jiangsu New Energy Development 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.