The three-year shareholder returns and company earnings persist lower as FangDa Carbon New MaterialLtd (SHSE:600516) stock falls a further 3.7% in past week

While not a mind-blowing move, it is good to see that the FangDa Carbon New Material Co.,Ltd (SHSE:600516) share price has gained 19% in the last three months. But that is small recompense for the exasperating returns over three years. Regrettably, the share price slid 54% in that period. Some might say the recent bounce is to be expected after such a bad drop. After all, could be that the fall was overdone.

After losing 3.7% 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 FangDa Carbon New MaterialLtd

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the three years that the share price fell, FangDa Carbon New MaterialLtd's earnings per share (EPS) dropped by 34% each year. This fall in the EPS is worse than the 23% compound annual share price fall. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term. With a P/E ratio of 66.17, it's fair to say the market sees a brighter future for the business.

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of FangDa Carbon New MaterialLtd's earnings, revenue and cash flow.

A Different Perspective

Investors in FangDa Carbon New MaterialLtd had a tough year, with a total loss of 6.6% (including dividends), against a market gain of about 12%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 7% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. 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. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for FangDa Carbon New MaterialLtd you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.