JiangSu Jinji IndustrialLtd (SZSE:300798) adds CN¥370m to market cap in the past 7 days, though investors from five years ago are still down 55%

It is a pleasure to report that the JiangSu Jinji Industrial Co.,Ltd. (SZSE:300798) is up 45% in the last quarter. But don't envy holders -- looking back over 5 years the returns have been really bad. In that time the share price has delivered a rude shock to holders, who find themselves down 55% after a long stretch. So we're hesitant to put much weight behind the short term increase. However, in the best case scenario (far from fait accompli), this improved performance might be sustained.

Although the past week has been more reassuring for shareholders, they're still in the red over the last five years, so let's see if the underlying business has been responsible for the decline.

See our latest analysis for JiangSu Jinji IndustrialLtd

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Over five years JiangSu Jinji IndustrialLtd's earnings per share dropped significantly, falling to a loss, with the share price also lower. This was, in part, due to extraordinary items impacting earnings. At present it's hard to make valid comparisons between EPS and the share price. However, we can say we'd expect to see a falling share price in this scenario.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on JiangSu Jinji IndustrialLtd's earnings, revenue and cash flow.

A Different Perspective

While the broader market gained around 14% in the last year, JiangSu Jinji IndustrialLtd shareholders lost 19% (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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 9% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 1 warning sign for JiangSu Jinji IndustrialLtd you should be aware of.

We will like JiangSu Jinji IndustrialLtd better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider 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.