Shenzhen WOTE Advanced MaterialsLtd (SZSE:002886) earnings and shareholder returns have been trending downwards for the last three years, but the stock ascends 9.6% this past week

It is doubtless a positive to see that the Shenzhen WOTE Advanced Materials Co.,Ltd (SZSE:002886) share price has gained some 32% in the last three months. But that doesn't help the fact that the three year return is less impressive. In fact, the share price is down 49% in the last three years, falling well short of the market return.

The recent uptick of 9.6% could be a positive sign of things to come, so let's take a look at historical fundamentals.

See our latest analysis for Shenzhen WOTE Advanced MaterialsLtd

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.

Shenzhen WOTE Advanced MaterialsLtd saw its EPS decline at a compound rate of 42% per year, over the last three years. This fall in the EPS is worse than the 20% compound annual share price fall. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term. With a P/E ratio of 291.93, it's fair to say the market sees a brighter future for the business.

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

We know that Shenzhen WOTE Advanced MaterialsLtd has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

A Different Perspective

While the broader market gained around 12% in the last year, Shenzhen WOTE Advanced MaterialsLtd shareholders lost 8.6% (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. On the bright side, long term shareholders have made money, with a gain of 4% per year over half a decade. 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. For instance, we've identified 2 warning signs for Shenzhen WOTE Advanced MaterialsLtd (1 is a bit concerning) that you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.