It is a pleasure to report that the Tech Semiconductors Co., Ltd. (SZSE:300046) is up 46% in the last quarter. But that doesn't change the fact that the returns over the last three years have been less than pleasing. In fact, the share price is down 38% in the last three years, falling well short of the market return.

With the stock having lost 13% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

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 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 three years that the share price fell, Tech Semiconductors' earnings per share (EPS) dropped by 49% each year. This was, in part, due to extraordinary items impacting earnings. In comparison the 15% compound annual share price decline isn't as bad as the EPS drop-off. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term. This positive sentiment is also reflected in the generous P/E ratio of 547.35.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

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

A Different Perspective

It's good to see that Tech Semiconductors has rewarded shareholders with a total shareholder return of 3.4% in the last twelve months. That certainly beats the loss of about 2% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Tech Semiconductors has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

We will like Tech Semiconductors better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.