Xiamen King Long Motor Group (SHSE:600686 investor one-year losses grow to 12% as the stock sheds CN¥545m this past week

It's easy to feel disappointed if you buy a stock that goes down. But often it is not a reflection of the fundamental business performance. The Xiamen King Long Motor Group Co., Ltd. (SHSE:600686) share price is down 12% in the last year. But that actually beats the market decline of 14%. On the bright side, the stock is actually up 7.2% in the last three years. The last month has also been disappointing, with the stock slipping a further 12%. But this could be related to poor market conditions -- stocks are down 6.3% in the same time.

If the past week is anything to go by, investor sentiment for Xiamen King Long Motor Group isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for Xiamen King Long Motor Group

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Xiamen King Long Motor Group managed to increase earnings per share from a loss to a profit, over the last 12 months.

Earnings per share growth rates aren't particularly useful for comparing with the share price, when a company has moved from loss to profit. So it makes sense to check out some other factors.

With a low yield of 0.5% we doubt that the dividend influences the share price much. Xiamen King Long Motor Group's revenue is actually up 3.0% over the last year. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free interactive report on Xiamen King Long Motor Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Although it hurts that Xiamen King Long Motor Group returned a loss of 12% in the last twelve months, the broader market was actually worse, returning a loss of 14%. Given the total loss of 2% per year over five years, it seems returns have deteriorated in the last twelve months. While some investors do well specializing in buying companies that are struggling (but nonetheless undervalued), don't forget that Buffett said that 'turnarounds seldom turn'. 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. Case in point: We've spotted 3 warning signs for Xiamen King Long Motor Group you should be aware of, and 1 of them is potentially serious.

We will like Xiamen King Long Motor Group 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com