Investors more bullish on Southwest Securities (SHSE:600369) this week as stock rallies 4.4%, despite earnings trending downwards over past year

It hasn't been the best quarter for Southwest Securities Co., Ltd. (SHSE:600369) shareholders, since the share price has fallen 10% in that time. But at least the stock is up over the last year. However, its return of 15% does fall short of the market return of, 22%.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

Check out our latest analysis for Southwest Securities

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Over the last twelve months, Southwest Securities actually shrank its EPS by 42%.

This means it's unlikely the market is judging the company based on earnings growth. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.

We doubt the modest 0.9% dividend yield is doing much to support the share price. Southwest Securities' revenue actually dropped 11% over last year. So the fundamental metrics don't provide an obvious explanation for the share price gain.

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. If you are thinking of buying or selling Southwest Securities stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

Southwest Securities shareholders gained a total return of 16% during the year. But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 0.4% per year, over five years. So this might be a sign the business has turned its fortunes around. It's always interesting to track share price performance over the longer term. But to understand Southwest Securities better, we need to consider many other factors. Take risks, for example - Southwest Securities has 1 warning sign we think you should be aware of.

We will like Southwest Securities better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider 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.