Jiangsu Hengshun Vinegar-Industry Co.,Ltd (SHSE:600305) shareholders should be happy to see the share price up 29% in the last quarter. But that cannot eclipse the less-than-impressive returns over the last three years. Truth be told the share price declined 43% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

While the last three years has been tough for Jiangsu Hengshun Vinegar-IndustryLtd shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

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.

During the three years that the share price fell, Jiangsu Hengshun Vinegar-IndustryLtd's earnings per share (EPS) dropped by 34% each year. In comparison the 17% 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 140.53.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It might be well worthwhile taking a look at our free report on Jiangsu Hengshun Vinegar-IndustryLtd's earnings, revenue and cash flow.

A Different Perspective

While the broader market gained around 14% in the last year, Jiangsu Hengshun Vinegar-IndustryLtd shareholders lost 5.2% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4% 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. 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. For example, we've discovered 2 warning signs for Jiangsu Hengshun Vinegar-IndustryLtd (1 is concerning!) that you should be aware of before investing here.

Of course Jiangsu Hengshun Vinegar-IndustryLtd 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.