Foshan Haitian Flavouring and Food Company Ltd. (SHSE:603288) shareholders should be happy to see the share price up 13% in the last month. But that doesn't change the fact that the returns over the last three years have been disappointing. Tragically, the share price declined 60% in that time. Some might say the recent bounce is to be expected after such a bad drop. After all, could be that the fall was overdone.

Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).

Foshan Haitian Flavouring and Food saw its EPS decline at a compound rate of 1.4% per year, over the last three years. This reduction in EPS is slower than the 26% annual reduction in the share price. So it seems the market was too confident about the business, in the past.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Dive deeper into Foshan Haitian Flavouring and Food's key metrics by checking this interactive graph of Foshan Haitian Flavouring and Food's earnings, revenue and cash flow.

A Different Perspective

While the broader market lost about 17% in the twelve months, Foshan Haitian Flavouring and Food shareholders did even worse, losing 40% (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 2%, 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. 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. To that end, you should be aware of the 1 warning sign we've spotted with Foshan Haitian Flavouring and Food .

We will like Foshan Haitian Flavouring and Food better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider 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.