Despite delivering investors losses of 11% over the past 3 years, Xi'an Triangle DefenseLtd (SZSE:300775) has been growing its earnings

Xi'an Triangle Defense Co.,Ltd (SZSE:300775) shareholders should be happy to see the share price up 28% in the last quarter. It's not great that the stock is down over the last three years. But that's not so bad when you consider its market is down 27%.

Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.

Check out our latest analysis for Xi'an Triangle DefenseLtd

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Although the share price is down over three years, Xi'an Triangle DefenseLtd actually managed to grow EPS by 45% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.

It is a little bizarre to see the share price down, despite a strong improvement to earnings per share. So we'll have to take a look at other metrics to try to understand the price action.

With a rather small yield of just 0.6% we doubt that the stock's share price is based on its dividend. Revenue is actually up 39% over the three years, so the share price drop doesn't seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching Xi'an Triangle DefenseLtd more closely, as sometimes stocks fall unfairly. This could present an opportunity.

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

We know that Xi'an Triangle DefenseLtd has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Xi'an Triangle DefenseLtd's financial health with this free report on its balance sheet.

A Different Perspective

Although it hurts that Xi'an Triangle DefenseLtd returned a loss of 9.1% in the last twelve months, the broader market was actually worse, returning a loss of 16%. Unfortunately, last year's performance may indicate unresolved challenges, given that it's worse than the annualised loss of 0.8% over the last half decade. Whilst Baron Rothschild does tell the investor "buy when there's blood in the streets, even if the blood is your own", buyers would need to examine the data carefully to be comfortable that the business itself is sound. It's always interesting to track share price performance over the longer term. But to understand Xi'an Triangle DefenseLtd better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Xi'an Triangle DefenseLtd you should know about.

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.

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