Harbin Hatou Investment Co.,Ltd (SHSE:600864) shareholders should be happy to see the share price up 26% in the last month. But that doesn't change the fact that the returns over the last five years have been less than pleasing. After all, the share price is down 12% in that time, significantly under-performing the market.

Since Harbin Hatou InvestmentLtd has shed CN¥957m 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 five years of share price growth, Harbin Hatou InvestmentLtd moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics may better explain the share price move.

It could be that the revenue decline of 3.2% per year is viewed as evidence that Harbin Hatou InvestmentLtd is shrinking. That could explain the weak share price.

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

We're pleased to report that Harbin Hatou InvestmentLtd shareholders have received a total shareholder return of 7.0% over one year. That certainly beats the loss of about 2% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. 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. Case in point: We've spotted 2 warning signs for Harbin Hatou InvestmentLtd you should be aware of, and 1 of them makes us a bit uncomfortable.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.