Investing in stocks inevitably means buying into some companies that perform poorly. Long term Longhua Technology Group Co.,Ltd. (SZSE:300263) shareholders know that all too well, since the share price is down considerably over three years. Regrettably, they have had to cope with a 63% drop in the share price over that period. The more recent news is of little comfort, with the share price down 32% in a year. Shareholders have had an even rougher run lately, with the share price down 20% in the last 90 days. But this could be related to the weak market, which is down 13% in the same period.

If the past week is anything to go by, investor sentiment for Longhua Technology GroupLtd isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Longhua Technology GroupLtd saw its EPS decline at a compound rate of 24% per year, over the last three years. This change in EPS is reasonably close to the 28% average annual decrease in the share price. So it seems like sentiment towards the stock hasn't changed all that much over time. Rather, the share price has approximately tracked EPS growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that Longhua Technology GroupLtd has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

A Different Perspective

We regret to report that Longhua Technology GroupLtd shareholders are down 32% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 17%. 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 4%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Before deciding if you like the current share price, check how Longhua Technology GroupLtd scores on these 3 valuation metrics.

But note: Longhua Technology GroupLtd 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.