Shareholders in Jinlihua Electric (SZSE:300069) have lost 41%, as stock drops 14% this past week

While not a mind-blowing move, it is good to see that the Jinlihua Electric Co., Ltd. (SZSE:300069) share price has gained 21% in the last three months. But that cannot eclipse the less-than-impressive returns over the last three years. In fact, the share price is down 41% in the last three years, falling well short of the market return.

If the past week is anything to go by, investor sentiment for Jinlihua Electric isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for Jinlihua Electric

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).

Jinlihua Electric became profitable within the last five years. We would usually expect to see the share price rise as a result. So given the share price is down it's worth checking some other metrics too.

We note that, in three years, revenue has actually grown at a 4.7% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating Jinlihua Electric further; while we may be missing something on this analysis, there might also be an opportunity.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

While the broader market gained around 12% in the last year, Jinlihua Electric shareholders lost 7.2%. 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 3% 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. It's always interesting to track share price performance over the longer term. But to understand Jinlihua Electric better, we need to consider many other factors. For example, we've discovered 1 warning sign for Jinlihua Electric that you should be aware of before investing here.

But note: Jinlihua Electric may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.