Global Infotech Co., Ltd. (SZSE:300465) shareholders might be concerned after seeing the share price drop 27% in the last quarter. On the other hand the returns over the last half decade have not been bad. The share price is up 34%, which is better than the market return of 29%.
Although Global Infotech has shed CN¥384m 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 Global Infotech
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. 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 five years of share price growth, Global Infotech actually saw its EPS drop 20% per year. This was, in part, due to extraordinary items impacting earning in the last twelve months.
Essentially, it doesn't seem likely that investors are focused on EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
It is not great to see that revenue has dropped by 0.5% per year over five years. It certainly surprises us that the share price is up, but perhaps a closer examination of the data will yield answers.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
Global Infotech shareholders are down 23% over twelve months, which isn't far from the market return of -21%. The silver lining is that longer term investors would have made a total return of 6% per year over half a decade. If the fundamental data remains strong, and the share price is simply down on sentiment, then this could be an opportunity worth investigating. It's always interesting to track share price performance over the longer term. But to understand Global Infotech better, we need to consider many other factors. For example, we've discovered 1 warning sign for Global Infotech that you should be aware of before investing here.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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.