Liaoning Shidai WanhengLtd (SHSE:600241) soars 16% this week, taking five-year gains to 32%

When we invest, we're generally looking for stocks that outperform the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. To wit, the Liaoning Shidai WanhengLtd share price has climbed 32% in five years, easily topping the market decline of 1.3% (ignoring dividends).

Since it's been a strong week for Liaoning Shidai WanhengLtd shareholders, let's have a look at trend of the longer term fundamentals.

View our latest analysis for Liaoning Shidai WanhengLtd

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 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 last half decade, Liaoning Shidai WanhengLtd became profitable. That's generally thought to be a genuine positive, so investors may expect to see an increasing share price. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the Liaoning Shidai WanhengLtd share price is down 11% in the last three years. During the same period, EPS grew by 31% each year. It would appear there's a real mismatch between the increasing EPS and the share price, which has declined -4% a year for three years.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

While it's certainly disappointing to see that Liaoning Shidai WanhengLtd shares lost 11% throughout the year, that wasn't as bad as the market loss of 14%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 6% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. Before forming an opinion on Liaoning Shidai WanhengLtd you might want to consider these 3 valuation metrics.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.