The three-year shareholder returns and company earnings persist lower as Shandong Linglong TyreLtd (SHSE:601966) stock falls a further 4.7% in past week

Shandong Linglong Tyre Co.,Ltd. (SHSE:601966) shareholders should be happy to see the share price up 16% in the last month. Meanwhile over the last three years the stock has dropped hard. Tragically, the share price declined 54% in that time. 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.

After losing 4.7% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

Check out our latest analysis for Shandong Linglong TyreLtd

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).

During the three years that the share price fell, Shandong Linglong TyreLtd's earnings per share (EPS) dropped by 9.2% each year. This reduction in EPS is slower than the 23% annual reduction in the share price. So it seems the market was too confident about the business, in the past.

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

We know that Shandong Linglong TyreLtd has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

A Different Perspective

Shandong Linglong TyreLtd shareholders are down 7.9% for the year (even including dividends), but the market itself is up 1.4%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.5% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Shandong Linglong TyreLtd (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.

We will like Shandong Linglong TyreLtd better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.