Shandong Hiking InternationalLtd's (SHSE:600735) earnings have declined over three years, contributing to shareholders 30% loss

Shandong Hiking International Co.,Ltd (SHSE:600735) shareholders should be happy to see the share price up 27% in the last quarter. But that doesn't change the fact that the returns over the last three years have been less than pleasing. After all, the share price is down 31% in the last three years, significantly under-performing the market.

On a more encouraging note the company has added CN¥227m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

See our latest analysis for Shandong Hiking InternationalLtd

There is no denying that markets are sometimes efficient, but prices do not always reflect 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 that the share price fell, Shandong Hiking InternationalLtd's earnings per share (EPS) dropped by 12% each year. The 12% average annual share price decline is remarkably close to the EPS decline. So it seems like sentiment towards the stock hasn't changed all that much over time. In this case, it seems that the EPS is guiding the share price.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of Shandong Hiking InternationalLtd's earnings, revenue and cash flow.

A Different Perspective

While the broader market gained around 7.4% in the last year, Shandong Hiking InternationalLtd shareholders lost 22% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. 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. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Shandong Hiking InternationalLtd better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Shandong Hiking InternationalLtd you should be aware of, and 1 of them makes us a bit uncomfortable.

Of course Shandong Hiking InternationalLtd 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.