Sichuan Huati Lighting TechnologyLtd's (SHSE:603679) earnings trajectory could turn positive as the stock soars 13% this past week

While it may not be enough for some shareholders, we think it is good to see the Sichuan Huati Lighting Technology Co.,Ltd. (SHSE:603679) share price up 14% in a single quarter. But that can't change the reality that over the longer term (five years), the returns have been really quite dismal. The share price has failed to impress anyone , down a sizable 63% during that time. Some might say the recent bounce is to be expected after such a bad drop. We'd err towards caution given the long term under-performance.

While the last five years has been tough for Sichuan Huati Lighting TechnologyLtd shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

View our latest analysis for Sichuan Huati Lighting TechnologyLtd

There is no denying that markets are sometimes efficient, but prices do not always reflect 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).

Sichuan Huati Lighting TechnologyLtd became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics might give us a better handle on how its value is changing over time.

The modest 1.5% dividend yield is unlikely to be guiding the market view of the stock. It could be that the revenue decline of 5.3% per year is viewed as evidence that Sichuan Huati Lighting TechnologyLtd is shrinking. This has probably encouraged some shareholders to sell down the stock.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

If you are thinking of buying or selling Sichuan Huati Lighting TechnologyLtd stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While the broader market lost about 12% in the twelve months, Sichuan Huati Lighting TechnologyLtd shareholders did even worse, losing 18% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Sichuan Huati Lighting TechnologyLtd better, we need to consider many other factors. Even so, be aware that Sichuan Huati Lighting TechnologyLtd is showing 4 warning signs in our investment analysis , and 2 of those are concerning...

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.

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

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.