Recent 9.7% pullback isn't enough to hurt long-term Shanghai Film (SHSE:601595) shareholders, they're still up 65% over 3 years

Shanghai Film Co., Ltd. (SHSE:601595) shareholders might understandably be very concerned that the share price has dropped 35% in the last quarter. But that doesn't change the fact that the returns over the last three years have been pleasing. To wit, the share price did better than an index fund, climbing 64% during that period.

While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

See our latest analysis for Shanghai Film

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During three years of share price growth, Shanghai Film moved from a loss to profitability. That would generally be considered a positive, so we'd expect the share price to be up.

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

It is of course excellent to see how Shanghai Film has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Shanghai Film's financial health with this free report on its balance sheet.

A Different Perspective

We regret to report that Shanghai Film shareholders are down 24% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 17%. 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 1.4%, 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. It's always interesting to track share price performance over the longer term. But to understand Shanghai Film better, we need to consider many other factors. Even so, be aware that Shanghai Film is showing 1 warning sign in our investment analysis , you should know about...

Of course Shanghai Film 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.