While Chengdu Information Technology of Chinese Academy of Sciences Co.,Ltd (SZSE:300678) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 22% in the last quarter. In contrast, the return over three years has been impressive. In fact, the share price is up a full 124% compared to three years ago. After a run like that some may not be surprised to see prices moderate. If the business can perform well for years to come, then the recent drop could be an opportunity.
Although Chengdu Information Technology of Chinese Academy of SciencesLtd has shed CN¥563m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the three years of share price growth, Chengdu Information Technology of Chinese Academy of SciencesLtd actually saw its earnings per share (EPS) drop 15% per year.
So we doubt that the market is looking to EPS for its main judge of the company's value. Therefore, we think it's worth considering other metrics as well.
Languishing at just 0.2%, we doubt the dividend is doing much to prop up the share price. It could be that the revenue growth of 6.9% per year is viewed as evidence that Chengdu Information Technology of Chinese Academy of SciencesLtd is growing. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder's faith in better days ahead will be rewarded.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
While the broader market lost about 9.1% in the twelve months, Chengdu Information Technology of Chinese Academy of SciencesLtd shareholders did even worse, losing 53% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 12%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Chengdu Information Technology of Chinese Academy of SciencesLtd better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Chengdu Information Technology of Chinese Academy of SciencesLtd you should know about.
But note: Chengdu Information Technology of Chinese Academy of SciencesLtd may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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.