Anhui Xinli Finance (SHSE:600318) stock falls 13% in past week as five-year earnings and shareholder returns continue downward trend

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in Anhui Xinli Finance Co., Ltd. (SHSE:600318), since the last five years saw the share price fall 24%. And we doubt long term believers are the only worried holders, since the stock price has declined 21% over the last twelve months. Furthermore, it's down 13% in about a quarter. That's not much fun for holders. However, one could argue that the price has been influenced by the general market, which is down 13% in the same timeframe.

With the stock having lost 13% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for Anhui Xinli Finance

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 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.

Anhui Xinli Finance became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics may better explain the share price move.

It could be that the revenue decline of 11% per year is viewed as evidence that Anhui Xinli Finance is shrinking. That could explain the weak share price.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Take a more thorough look at Anhui Xinli Finance's financial health with this free report on its balance sheet.

A Different Perspective

While the broader market lost about 16% in the twelve months, Anhui Xinli Finance shareholders did even worse, losing 21%. 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 4% 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. It's always interesting to track share price performance over the longer term. But to understand Anhui Xinli Finance better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Anhui Xinli Finance you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.