Milkyway Chemical Supply Chain Service Co.,Ltd (SHSE:603713) shareholders will doubtless be very grateful to see the share price up 31% in the last quarter. But that doesn't help the fact that the three year return is less impressive. In fact, the share price is down 50% in the last three years, falling well short of the market return.

If the past week is anything to go by, investor sentiment for Milkyway Chemical Supply Chain ServiceLtd isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

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 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.

Although the share price is down over three years, Milkyway Chemical Supply Chain ServiceLtd actually managed to grow EPS by 11% per year in that time. 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.

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. We note that, in three years, revenue has actually grown at a 6.6% 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 Milkyway Chemical Supply Chain ServiceLtd 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).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

Milkyway Chemical Supply Chain ServiceLtd shareholders are down 5.4% for the year (even including dividends), but the market itself is up 5.3%. 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. Longer term investors wouldn't be so upset, since they would have made 8%, 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 Milkyway Chemical Supply Chain ServiceLtd better, we need to consider many other factors. Take risks, for example - Milkyway Chemical Supply Chain ServiceLtd has 2 warning signs (and 1 which is significant) we think you should know about.

Of course Milkyway Chemical Supply Chain ServiceLtd 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.