Sobute New Materials' (SHSE:603916) earnings have declined over three years, contributing to shareholders 56% loss

Sobute New Materials Co., Ltd (SHSE:603916) shareholders should be happy to see the share price up 20% in the last month. Meanwhile over the last three years the stock has dropped hard. Tragically, the share price declined 57% in that time. So the improvement may be a real relief to some. Perhaps the company has turned over a new leaf.

While the last three years has been tough for Sobute New Materials shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

View our latest analysis for Sobute New Materials

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Sobute New Materials saw its EPS decline at a compound rate of 35% per year, over the last three years. In comparison the 25% compound annual share price decline isn't as bad as the EPS drop-off. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term.

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

This free interactive report on Sobute New Materials' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

We regret to report that Sobute New Materials shareholders are down 34% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 8.7%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.8% per year over five years. 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 Sobute New Materials better, we need to consider many other factors. Take risks, for example - Sobute New Materials has 3 warning signs we think you should be aware of.

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.