Some Jiangsu Zhengdan Chemical Industry Co., Ltd. (SZSE:300641) shareholders are probably rather concerned to see the share price fall 42% over the last three months. On the other hand, over the last twelve months the stock has delivered rather impressive returns. We're very pleased to report the share price shot up 270% in that time. So some might not be surprised to see the price retrace some. Investors should be wondering whether the business itself has the fundamental value required to continue to drive gains.

While this past week has detracted from the company's one-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

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 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.

Jiangsu Zhengdan Chemical Industry boasted truly magnificent EPS growth in the last year. While that particular rate of growth is unlikely to be sustained for long, it is still remarkable. So we'd expect to see the share price higher. To us, inflection points like this are the best time to take a close look at a stock.

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

Dive deeper into Jiangsu Zhengdan Chemical Industry's key metrics by checking this interactive graph of Jiangsu Zhengdan Chemical Industry's earnings, revenue and cash flow.

A Different Perspective

We're pleased to report that Jiangsu Zhengdan Chemical Industry shareholders have received a total shareholder return of 270% over one year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 29%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Jiangsu Zhengdan Chemical Industry (of which 2 make us uncomfortable!) you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.