Jiangsu Huahong Technology Co., Ltd. (SZSE:002645) shareholders should be happy to see the share price up 15% in the last week. But that doesn't change the fact that the returns over the last three years have been disappointing. In that time, the share price dropped 68%. So it is really good to see an improvement. While many would remain nervous, there could be further gains if the business can put its best foot forward.

The recent uptick of 15% could be a positive sign of things to come, so let's take a look at historical fundamentals.

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. 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).

Over the three years that the share price declined, Jiangsu Huahong Technology's earnings per share (EPS) dropped significantly, falling to a loss. Due to the loss, it's not easy to use EPS as a reliable guide to the business. However, we can say we'd expect to see a falling share price in this scenario.

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

This free interactive report on Jiangsu Huahong Technology's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

We regret to report that Jiangsu Huahong Technology shareholders are down 39% for the year. Unfortunately, that's worse than the broader market decline of 20%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Even so, be aware that Jiangsu Huahong Technology is showing 2 warning signs in our investment analysis , and 1 of those is a bit concerning...

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com