Taking the occasional loss comes part and parcel with investing on the stock market. Anyone who held Sichuan Yahua Industrial Group Co., Ltd. (SZSE:002497) over the last year knows what a loser feels like. To wit the share price is down 53% in that time. To make matters worse, the returns over three years have also been really disappointing (the share price is 39% lower than three years ago). But it's up 6.4% in the last week. The buoyant market could have helped drive the share price pop, since stocks are up 2.6% in the same period.
While the stock has risen 6.4% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Unfortunately Sichuan Yahua Industrial Group reported an EPS drop of 53% for the last year. Remarkably, he share price decline of 53% per year is particularly close to the EPS drop. Therefore one could posit that the market has not become more concerned about the company, despite the lower EPS. Instead, the change in the share price seems to reduction in earnings per share, alone.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Sichuan Yahua Industrial Group has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Sichuan Yahua Industrial Group's financial health with this free report on its balance sheet.
A Different Perspective
We regret to report that Sichuan Yahua Industrial Group shareholders are down 52% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 17%. 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 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. It's always interesting to track share price performance over the longer term. But to understand Sichuan Yahua Industrial Group better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Sichuan Yahua Industrial Group (of which 1 shouldn't be ignored!) you should know about.
We will like Sichuan Yahua Industrial Group 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.
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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.