The five-year shareholder returns and company earnings persist lower as Chengzhi (SZSE:000990) stock falls a further 4.2% in past week

While it may not be enough for some shareholders, we think it is good to see the Chengzhi Co., Ltd. (SZSE:000990) share price up 17% in a single quarter. But that is little comfort to those holding over the last half decade, sitting on a big loss. In fact, the share price has declined rather badly, down some 58% in that time. So we're hesitant to put much weight behind the short term increase. Of course, this could be the start of a turnaround.

Since Chengzhi has shed CN¥450m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Chengzhi

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, Chengzhi moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics may better explain the share price move.

In contrast to the share price, revenue has actually increased by 14% a year in the five year period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Take a more thorough look at Chengzhi's financial health with this free report on its balance sheet.

A Different Perspective

It's good to see that Chengzhi has rewarded shareholders with a total shareholder return of 3.4% in the last twelve months. Notably the five-year annualised TSR loss of 9% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. 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 2 warning signs with Chengzhi (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.