4.9% earnings growth over 3 years has not materialized into gains for Zhejiang Huayou Cobalt (SHSE:603799) shareholders over that period

Investing in stocks inevitably means buying into some companies that perform poorly. But long term Zhejiang Huayou Cobalt Co., Ltd (SHSE:603799) shareholders have had a particularly rough ride in the last three year. Unfortunately, they have held through a 65% decline in the share price in that time. The more recent news is of little comfort, with the share price down 44% in a year. Even worse, it's down 12% in about a month, which isn't fun at all. We do note, however, that the broader market is down 5.4% in that period, and this may have weighed on the share price.

With the stock having lost 5.7% 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 Zhejiang Huayou Cobalt

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).

Although the share price is down over three years, Zhejiang Huayou Cobalt actually managed to grow EPS by 15% per year in that time. 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 32% over the three years, so the share price drop doesn't seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching Zhejiang Huayou Cobalt more closely, as sometimes stocks fall unfairly. This could present an opportunity.

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

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

While the broader market lost about 12% in the twelve months, Zhejiang Huayou Cobalt shareholders did even worse, losing 44% (even including dividends). 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. Longer term investors wouldn't be so upset, since they would have made 10%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Zhejiang Huayou Cobalt (at least 1 which is concerning) , and understanding them should be part of your investment process.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.