Earnings growth of 3.4% over 3 years hasn't been enough to translate into positive returns for Sichuan Teway Food GroupLtd (SHSE:603317) shareholders

For many investors, the main point of stock picking is to generate higher returns than the overall market. But if you try your hand at stock picking, you risk returning less than the market. We regret to report that long term Sichuan Teway Food Group Co.,Ltd (SHSE:603317) shareholders have had that experience, with the share price dropping 36% in three years, versus a market decline of about 23%. More recently, the share price has dropped a further 10% in a month. However, we note the price may have been impacted by the broader market, which is down 5.4% in the same time period.

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

See our latest analysis for Sichuan Teway Food GroupLtd

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the unfortunate three years of share price decline, Sichuan Teway Food GroupLtd actually saw its earnings per share (EPS) improve by 11% per year. 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's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

Revenue is actually up 13% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating Sichuan Teway Food GroupLtd further; while we may be missing something on this analysis, there might also be an opportunity.

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

Sichuan Teway Food GroupLtd is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Sichuan Teway Food GroupLtd in this interactive graph of future profit estimates.

A Different Perspective

While the broader market lost about 13% in the twelve months, Sichuan Teway Food GroupLtd shareholders did even worse, losing 14% (even including dividends). 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% 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 Sichuan Teway Food GroupLtd better, we need to consider many other factors. Even so, be aware that Sichuan Teway Food GroupLtd is showing 1 warning sign in our investment analysis , you should know about...

But note: Sichuan Teway Food GroupLtd may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.