Zhejiang Dun'an Artificial Environment (SZSE:002011) pulls back 14% this week, but still delivers shareholders strong 16% CAGR over 5 years

The Zhejiang Dun'an Artificial Environment Co., Ltd (SZSE:002011) share price has had a bad week, falling 14%. But that doesn't change the fact that shareholders have received really good returns over the last five years. It's fair to say most would be happy with 107% the gain in that time. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. The more important question is whether the stock is too cheap or too expensive today.

While the stock has fallen 14% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

View our latest analysis for Zhejiang Dun'an Artificial Environment

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 five years of share price growth, Zhejiang Dun'an Artificial Environment moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Zhejiang Dun'an Artificial Environment has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Zhejiang Dun'an Artificial Environment stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While the broader market lost about 0.6% in the twelve months, Zhejiang Dun'an Artificial Environment shareholders did even worse, losing 9.3%. 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. On the bright side, long term shareholders have made money, with a gain of 16% per year over half a decade. 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. Before deciding if you like the current share price, check how Zhejiang Dun'an Artificial Environment scores on these 3 valuation metrics.

Of course Zhejiang Dun'an Artificial Environment may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.