Earnings are growing at Huakai Yibai TechnologyLtd (SZSE:300592) but shareholders still don't like its prospects

Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. That downside risk was realized by Huakai Yibai Technology Co.,Ltd. (SZSE:300592) shareholders over the last year, as the share price declined 48%. That contrasts poorly with the market decline of 17%. To make matters worse, the returns over three years have also been really disappointing (the share price is 44% lower than three years ago). Furthermore, it's down 23% in about a quarter. That's not much fun for holders.

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

See our latest analysis for Huakai Yibai TechnologyLtd

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.

Even though the Huakai Yibai TechnologyLtd share price is down over the year, its EPS actually improved. Of course, the situation might betray previous over-optimism about growth.

It's surprising to see the share price fall so much, despite the improved EPS. But we might find some different metrics explain the share price movements better.

Huakai Yibai TechnologyLtd managed to grow revenue over the last year, which is usually a real positive. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We know that Huakai Yibai TechnologyLtd has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Huakai Yibai TechnologyLtd stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

We regret to report that Huakai Yibai TechnologyLtd shareholders are down 47% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 17%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 8% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Take risks, for example - Huakai Yibai TechnologyLtd has 1 warning sign we think you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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