Ningbo Ronbay New Energy TechnologyLtd's (SHSE:688005) earnings trajectory could turn positive as the stock spikes 39% this past week

Ningbo Ronbay New Energy Technology Co.,Ltd. (SHSE:688005) shareholders will doubtless be very grateful to see the share price up 39% in the last week. But that is meagre solace in the face of the shocking decline over three years. Indeed, the share price is down a whopping 73% in the last three years. Arguably, the recent bounce is to be expected after such a bad drop. But the more important question is whether the underlying business can justify a higher price still.

While the stock has risen 39% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

View our latest analysis for Ningbo Ronbay New Energy TechnologyLtd

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, Ningbo Ronbay New Energy TechnologyLtd's earnings per share (EPS) dropped by 26% each year. The share price decline of 36% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past. Of course, with a P/E ratio of 66.11, the market remains optimistic.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

Ningbo Ronbay New Energy TechnologyLtd shareholders are down 30% for the year (even including dividends), but the market itself is up 3.3%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% over the last half decade. 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 Ningbo Ronbay New Energy TechnologyLtd better, we need to consider many other factors. Take risks, for example - Ningbo Ronbay New Energy TechnologyLtd has 3 warning signs 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.