Zhuzhou Kibing GroupLtd's (SHSE:601636) earnings trajectory could turn positive as the stock lifts 3.9% this past week

It is doubtless a positive to see that the Zhuzhou Kibing Group Co.,Ltd (SHSE:601636) share price has gained some 32% in the last three months. But over the last three years we've seen a quite serious decline. In that time, the share price dropped 64%. So the improvement may be a real relief to some. While many would remain nervous, there could be further gains if the business can put its best foot forward.

On a more encouraging note the company has added CN¥642m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

Check out our latest analysis for Zhuzhou Kibing GroupLtd

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, Zhuzhou Kibing GroupLtd's earnings per share (EPS) dropped by 35% each year. This fall in EPS isn't far from the rate of share price decline, which was 29% per year. So it seems like sentiment towards the stock hasn't changed all that much over time. In this case, it seems that the EPS is guiding the share price.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

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. This free interactive report on Zhuzhou Kibing GroupLtd's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Zhuzhou Kibing GroupLtd the TSR over the last 3 years was -59%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

While the broader market gained around 11% in the last year, Zhuzhou Kibing GroupLtd shareholders lost 5.1% (even including dividends). 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. Longer term investors wouldn't be so upset, since they would have made 11%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Zhuzhou Kibing GroupLtd better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with Zhuzhou Kibing GroupLtd (including 2 which are significant) .

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.