The three-year shareholder returns and company earnings persist lower as Qingdao Hanhe CableLtd (SZSE:002498) stock falls a further 4.2% in past week

While it may not be enough for some shareholders, we think it is good to see the Qingdao Hanhe Cable Co.,Ltd (SZSE:002498) share price up 16% in a single quarter. But that cannot eclipse the less-than-impressive returns over the last three years. Truth be told the share price declined 34% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

Since Qingdao Hanhe CableLtd has shed CN¥499m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Qingdao Hanhe CableLtd

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the three years that the share price fell, Qingdao Hanhe CableLtd's earnings per share (EPS) dropped by 7.4% each year. This reduction in EPS is slower than the 13% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.

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

It might be well worthwhile taking a look at our free report on Qingdao Hanhe CableLtd's earnings, revenue and cash flow.

A Different Perspective

While the broader market gained around 12% in the last year, Qingdao Hanhe CableLtd shareholders lost 11% (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 4%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 1 warning sign for Qingdao Hanhe CableLtd that you should be aware of before investing here.

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.