Linzhou Heavy Machinery GroupLtd's (SZSE:002535) three-year earnings growth trails the stellar shareholder returns

Linzhou Heavy Machinery Group Co.,Ltd (SZSE:002535) shareholders might be concerned after seeing the share price drop 10% in the last quarter. In contrast, the return over three years has been impressive. The share price marched upwards over that time, and is now 107% higher than it was. To some, the recent share price pullback wouldn't be surprising after such a good run. The thing to consider is whether the underlying business is doing well enough to support the current price.

Since the stock has added CN¥457m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Linzhou Heavy Machinery GroupLtd

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).

Linzhou Heavy Machinery GroupLtd was able to grow its EPS at 44% per year over three years, sending the share price higher. This EPS growth is higher than the 27% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat.

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

This free interactive report on Linzhou Heavy Machinery GroupLtd's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market lost about 18% in the twelve months, Linzhou Heavy Machinery GroupLtd shareholders did even worse, losing 32%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 2%, 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. It's always interesting to track share price performance over the longer term. But to understand Linzhou Heavy Machinery GroupLtd better, we need to consider many other factors. For example, we've discovered 3 warning signs for Linzhou Heavy Machinery GroupLtd that you should be aware of before investing here.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.

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