Zhejiang Jinfei Kaida WheelLtd (SZSE:002863) shareholders have lost 30% over 1 year, earnings decline likely the culprit

Zhejiang Jinfei Kaida Wheel Co.,Ltd. (SZSE:002863) shareholders should be happy to see the share price up 15% in the last month. But that doesn't change the reality of under-performance over the last twelve months. In fact the stock is down 31% in the last year, well below the market return.

With the stock having lost 11% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

View our latest analysis for Zhejiang Jinfei Kaida WheelLtd

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 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).

Unhappily, Zhejiang Jinfei Kaida WheelLtd had to report a 35% decline in EPS over the last year. This proportional reduction in earnings per share isn't far from the 31% decrease in the share price. Therefore one could posit that the market has not become more concerned about the company, despite the lower EPS. Instead, the change in the share price seems to reduction in earnings per share, alone.

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

It might be well worthwhile taking a look at our free report on Zhejiang Jinfei Kaida WheelLtd's earnings, revenue and cash flow.

A Different Perspective

We regret to report that Zhejiang Jinfei Kaida WheelLtd shareholders are down 30% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 0.6%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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 4 warning signs with Zhejiang Jinfei Kaida WheelLtd (at least 1 which is potentially serious) , and understanding them should be part of your investment process.

We will like Zhejiang Jinfei Kaida WheelLtd 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.