Hangzhou Youngsun Intelligent Equipment Co., Ltd. (SHSE:603901) shareholders should be happy to see the share price up 13% in the last month. But over the last three years we've seen a quite serious decline. Indeed, the share price is down a tragic 57% in the last three years. So it's good to see it climbing back up. After all, could be that the fall was overdone.

Since Hangzhou Youngsun Intelligent Equipment has shed CN¥586m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the three years that the share price fell, Hangzhou Youngsun Intelligent Equipment's earnings per share (EPS) dropped by 71% each year. The recent extraordinary items made their mark on profits. This fall in the EPS is worse than the 25% compound annual share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in. With a P/E ratio of 543.06, it's fair to say the market sees a brighter future for the business.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

Hangzhou Youngsun Intelligent Equipment shareholders are down 44% for the year (even including dividends), but the market itself is up 0.4%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Even so, be aware that Hangzhou Youngsun Intelligent Equipment is showing 4 warning signs in our investment analysis , and 2 of those are a bit unpleasant...

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.