Haoersai Technology Group (SZSE:002963) sheds CN¥256m, company earnings and investor returns have been trending downwards for past five years

While it may not be enough for some shareholders, we think it is good to see the Haoersai Technology Group Corp., Ltd. (SZSE:002963) share price up 17% in a single quarter. But that is little comfort to those holding over the last half decade, sitting on a big loss. Indeed, the share price is down 66% in the period. Some might say the recent bounce is to be expected after such a bad drop. But it could be that the fall was overdone.

Since Haoersai Technology Group has shed CN¥256m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for Haoersai Technology Group

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Haoersai Technology Group became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics may better explain the share price move.

Arguably, the revenue drop of 18% a year for half a decade suggests that the company can't grow in the long term. This has probably encouraged some shareholders to sell down the stock.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Take a more thorough look at Haoersai Technology Group's financial health with this free report on its balance sheet.

A Different Perspective

Investors in Haoersai Technology Group had a tough year, with a total loss of 23%, against a market gain of about 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 11% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 2 warning signs for Haoersai Technology Group you should be aware of, and 1 of them is a bit unpleasant.

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.