Guangdong Aofei Data Technology Co., Ltd. (SZSE:300738) shareholders might be concerned after seeing the share price drop 22% in the last quarter. On the bright side the returns have been quite good over the last half decade. It has returned a market beating 98% in that time.

In light of the stock dropping 6.5% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 half a decade, Guangdong Aofei Data Technology managed to grow its earnings per share at 14% a year. This EPS growth is reasonably close to the 15% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. Rather, the share price has approximately tracked EPS growth.

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of Guangdong Aofei Data Technology's earnings, revenue and cash flow.

A Different Perspective

Although it hurts that Guangdong Aofei Data Technology returned a loss of 8.8% in the last twelve months, the broader market was actually worse, returning a loss of 19%. Longer term investors wouldn't be so upset, since they would have made 15%, each year, over five years. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. It's always interesting to track share price performance over the longer term. But to understand Guangdong Aofei Data Technology better, we need to consider many other factors. For example, we've discovered 2 warning signs for Guangdong Aofei Data Technology that you should be aware of before investing here.

Of course Guangdong Aofei Data Technology may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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