It is doubtless a positive to see that the Shanghai Milkground Food Tech Co., Ltd (SHSE:600882) share price has gained some 49% in the last three months. But over the last three years we've seen a quite serious decline. In that time, the share price dropped 70%. So it is really good to see an improvement. The rise has some hopeful, but turnarounds are often precarious.
On a more encouraging note the company has added CN¥572m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
During the three years that the share price fell, Shanghai Milkground Food Tech's earnings per share (EPS) dropped by 7.6% each year. The share price decline of 33% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past. Having said that, the market is still optimistic, given the P/E ratio of 69.05.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Shanghai Milkground Food Tech has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
A Different Perspective
It's good to see that Shanghai Milkground Food Tech has rewarded shareholders with a total shareholder return of 8.7% in the last twelve months. That gain is better than the annual TSR over five years, which is 7%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before forming an opinion on Shanghai Milkground Food Tech you might want to consider these 3 valuation metrics.
But note: Shanghai Milkground Food Tech 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.
