Lingyi iTech (Guangdong) Company (SZSE:002600) shareholders should be happy to see the share price up 11% in the last month. But that doesn't change the fact that the returns over the last three years have been less than pleasing. Truth be told the share price declined 29% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).

Although the share price is down over three years, Lingyi iTech (Guangdong) actually managed to grow EPS by 21% 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 1.0% we doubt that the stock's share price is based on its dividend. Revenue is actually up 8.7% over the three years, so the share price drop doesn't seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching Lingyi iTech (Guangdong) more closely, as sometimes stocks fall unfairly. This could present 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 Lingyi iTech (Guangdong) 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 Lingyi iTech (Guangdong) will earn in the future (free profit forecasts).

A Different Perspective

While it's never nice to take a loss, Lingyi iTech (Guangdong) shareholders can take comfort that , including dividends,their trailing twelve month loss of 4.4% wasn't as bad as the market loss of around 11%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 1.5% for each year. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Lingyi iTech (Guangdong) , and understanding them should be part of your investment process.

Of course Lingyi iTech (Guangdong) 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.