Investors three-year losses continue as Anhui Jinhe IndustrialLtd (SZSE:002597) dips a further 3.5% this week, earnings continue to decline

For many investors, the main point of stock picking is to generate higher returns than the overall market. But if you try your hand at stock picking, you risk returning less than the market. Unfortunately, that's been the case for longer term Anhui Jinhe Industrial Co.,Ltd. (SZSE:002597) shareholders, since the share price is down 39% in the last three years, falling well short of the market decline of around 25%. Furthermore, it's down 12% in about a quarter. That's not much fun for holders.

With the stock having lost 3.5% 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 Anhui Jinhe IndustrialLtd

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).

Anhui Jinhe IndustrialLtd saw its EPS decline at a compound rate of 8.3% per year, over the last three years. This reduction in EPS is slower than the 15% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

Dive deeper into Anhui Jinhe IndustrialLtd's key metrics by checking this interactive graph of Anhui Jinhe IndustrialLtd's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Anhui Jinhe IndustrialLtd the TSR over the last 3 years was -35%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

While the broader market lost about 15% in the twelve months, Anhui Jinhe IndustrialLtd shareholders did even worse, losing 19% (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 0.5%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Take risks, for example - Anhui Jinhe IndustrialLtd has 2 warning signs we think you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com