When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, you can make far more than 100% on a really good stock. One great example is Fujian Mindong Electric Power Limited Company (SZSE:000993) which saw its share price drive 108% higher over five years. But it's down 8.3% in the last week. But this could be related to the soft market, with stocks selling off around 5.6% in the last week.
Although Fujian Mindong Electric Power Limited has shed CN¥380m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
See our latest analysis for Fujian Mindong Electric Power Limited
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 five years of share price growth, Fujian Mindong Electric Power Limited moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
A Different Perspective
While it's certainly disappointing to see that Fujian Mindong Electric Power Limited shares lost 12% throughout the year, that wasn't as bad as the market loss of 21%. Longer term investors wouldn't be so upset, since they would have made 16%, each year, over five years. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. 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 1 warning sign for Fujian Mindong Electric Power Limited that you should be aware of before investing here.
If you are like me, then you will not want to miss this free list of growing companies 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.
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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.