The three-year shareholder returns and company earnings persist lower as Shandong Tongda Island New MaterialsLtd (SZSE:300321) stock falls a further 15% in past week

Shandong Tongda Island New Materials Co.,Ltd. (SZSE:300321) shareholders should be happy to see the share price up 19% in the last month. If you look at the last three years, the stock price is down. But that's not so bad when you consider its market is down 17%.

Since Shandong Tongda Island New MaterialsLtd has shed CN¥244m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for Shandong Tongda Island New MaterialsLtd

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

Shandong Tongda Island New MaterialsLtd became profitable within the last five years. We would usually expect to see the share price rise as a result. So it's worth looking at other metrics to try to understand the share price move.

Arguably the revenue decline of 15% per year has people thinking Shandong Tongda Island New MaterialsLtd is shrinking. After all, if revenue keeps shrinking, it may be difficult to find earnings growth in the future.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

If you are thinking of buying or selling Shandong Tongda Island New MaterialsLtd stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

We regret to report that Shandong Tongda Island New MaterialsLtd shareholders are down 5.4% for the year. Unfortunately, that's worse than the broader market decline of 0.6%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 0.2% over the last half decade. 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 Shandong Tongda Island New MaterialsLtd better, we need to consider many other factors. Even so, be aware that Shandong Tongda Island New MaterialsLtd is showing 2 warning signs in our investment analysis , and 1 of those can't be ignored...

Of course Shandong Tongda Island New MaterialsLtd may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.