It's nice to see the Shenzhen Absen Optoelectronic Co.,Ltd. (SZSE:300389) share price up 15% in a week. But that doesn't change the reality of under-performance over the last twelve months. In fact the stock is down 35% in the last year, well below the market return.
While the last year has been tough for Shenzhen Absen OptoelectronicLtd 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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Unfortunately Shenzhen Absen OptoelectronicLtd reported an EPS drop of 3.3% for the last year. This reduction in EPS is not as bad as the 35% share price fall. So it seems the market was too confident about the business, a year ago.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It might be well worthwhile taking a look at our free report on Shenzhen Absen OptoelectronicLtd's earnings, revenue and cash flow.
A Different Perspective
While the broader market lost about 10% in the twelve months, Shenzhen Absen OptoelectronicLtd shareholders did even worse, losing 33% (even including dividends). 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 1.7%, 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. 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. Take risks, for example - Shenzhen Absen OptoelectronicLtd has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.
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.
