Strong week for Shenzhen Ruihe Construction Decoration (SZSE:002620) shareholders doesn't alleviate pain of three-year loss

Shenzhen Ruihe Construction Decoration Co., Ltd. (SZSE:002620) shareholders should be happy to see the share price up 14% in the last week. But that is small recompense for the exasperating returns over three years. Regrettably, the share price slid 69% in that period. So the improvement may be a real relief to some. Perhaps the company has turned over a new leaf.

While the last three years has been tough for Shenzhen Ruihe Construction Decoration shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

See our latest analysis for Shenzhen Ruihe Construction Decoration

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Shenzhen Ruihe Construction Decoration saw its share price decline over the three years in which its EPS also dropped, falling to a loss. Due to the loss, it's not easy to use EPS as a reliable guide to the business. But it's safe to say we'd generally expect the share price to be lower as a result!

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

Dive deeper into Shenzhen Ruihe Construction Decoration's key metrics by checking this interactive graph of Shenzhen Ruihe Construction Decoration's earnings, revenue and cash flow.

A Different Perspective

We regret to report that Shenzhen Ruihe Construction Decoration shareholders are down 53% for the year. Unfortunately, that's worse than the broader market decline of 18%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 9% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Shenzhen Ruihe Construction Decoration , and understanding them should be part of your investment process.

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