Yantai Eddie Precision Machinery's (SHSE:603638) earnings trajectory could turn positive as the stock advances 3.7% this past week

Yantai Eddie Precision Machinery Co., Ltd. (SHSE:603638) shareholders should be happy to see the share price up 11% in the last quarter. But that doesn't help the fact that the three year return is less impressive. After all, the share price is down 45% in the last three years, significantly under-performing the market.

Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.

Check out our latest analysis for Yantai Eddie Precision Machinery

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 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 three years that the share price fell, Yantai Eddie Precision Machinery's earnings per share (EPS) dropped by 10% each year. The share price decline of 18% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past.

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

We know that Yantai Eddie Precision Machinery has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

A Different Perspective

Yantai Eddie Precision Machinery shareholders gained a total return of 5.0% during the year. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 4% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. 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. Take risks, for example - Yantai Eddie Precision Machinery has 1 warning sign we think you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.