While shareholders of Zhejiang Huatong Meat Products (SZSE:002840) are in the black over 3 years, those who bought a week ago aren't so fortunate

It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Zhejiang Huatong Meat Products Co., Ltd. (SZSE:002840) share price has soared 130% in the last three years. Most would be happy with that. Also pleasing for shareholders was the 19% gain in the last three months.

Although Zhejiang Huatong Meat Products has shed CN¥712m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

View our latest analysis for Zhejiang Huatong Meat Products

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 three years of share price growth, Zhejiang Huatong Meat Products actually saw its earnings per share (EPS) drop 69% per year.

This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

We severely doubt anyone is particularly impressed with the modest 0.7% three-year revenue growth rate. While we don't have an obvious theory to explain the share price rise, a closer look at the data might be enlightening.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

It's good to see that Zhejiang Huatong Meat Products has rewarded shareholders with a total shareholder return of 41% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 16% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Zhejiang Huatong Meat Products better, we need to consider many other factors. For example, we've discovered 1 warning sign for Zhejiang Huatong Meat Products that you should be aware of before investing here.

Of course Zhejiang Huatong Meat Products may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.