Investing in stocks inevitably means buying into some companies that perform poorly. But the long term shareholders of Shanghai Fullhan Microelectronics Co., Ltd. (SZSE:300613) have had an unfortunate run in the last three years. Unfortunately, they have held through a 70% decline in the share price in that time. And over the last year the share price fell 36%, so we doubt many shareholders are delighted. Unfortunately the share price momentum is still quite negative, with prices down 17% in thirty days. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

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, Shanghai Fullhan Microelectronics actually saw its earnings per share (EPS) improve by 7.5% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.

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.

The modest 0.4% 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 5.1% 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 Shanghai Fullhan Microelectronics more closely, as sometimes stocks fall unfairly. This could present an opportunity.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

This free interactive report on Shanghai Fullhan Microelectronics' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

We regret to report that Shanghai Fullhan Microelectronics shareholders are down 36% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 17%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 5%, 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. 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. Take risks, for example - Shanghai Fullhan Microelectronics has 2 warning signs we think you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.