Henan Ancai Hi-Tech Co.,Ltd (SHSE:600207) shareholders should be happy to see the share price up 27% in the last month. But in truth the last year hasn't been good for the share price. In fact, the price has declined 21% in a year, falling short of the returns you could get by investing in an index fund.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

There is no denying that markets are sometimes efficient, but prices do not always reflect 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).

Unhappily, Henan Ancai Hi-TechLtd had to report a 92% decline in EPS over the last year. The share price fall of 21% isn't as bad as the reduction in earnings per share. So the market may not be too worried about the EPS figure, at the moment -- or it may have expected earnings to drop faster. With a P/E ratio of 541.79, it's fair to say the market sees an EPS rebound on the cards.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

While the broader market lost about 13% in the twelve months, Henan Ancai Hi-TechLtd shareholders did even worse, losing 21%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.8% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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 3 warning signs for Henan Ancai Hi-TechLtd you should be aware of, and 2 of them don't sit too well with us.

But note: Henan Ancai Hi-TechLtd may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.