Positive earnings growth hasn't been enough to get Dalian Zhiyun Automation (SZSE:300097) shareholders a favorable return over the last five years

Dalian Zhiyun Automation Co., Ltd. (SZSE:300097) shareholders should be happy to see the share price up 15% in the last month. But if you look at the last five years the returns have not been good. After all, the share price is down 46% in that time, significantly under-performing the market.

The recent uptick of 13% could be a positive sign of things to come, so let's take a look at historical fundamentals.

See our latest analysis for Dalian Zhiyun Automation

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 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 five years of share price growth, Dalian Zhiyun Automation moved from a loss to profitability. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.

It could be that the revenue decline of 7.1% per year is viewed as evidence that Dalian Zhiyun Automation is shrinking. That could explain the weak share price.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

If you are thinking of buying or selling Dalian Zhiyun Automation stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Although it hurts that Dalian Zhiyun Automation returned a loss of 2.5% in the last twelve months, the broader market was actually worse, returning a loss of 17%. What is more upsetting is the 8% per annum loss investors have suffered over the last half decade. This sort of share price action isn't particularly encouraging, but at least the losses are slowing. 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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Dalian Zhiyun Automation (of which 1 is significant!) you should know about.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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