The five-year loss for Jinyu Bio-technology (SHSE:600201) shareholders likely driven by its shrinking earnings

It's nice to see the Jinyu Bio-technology Co., Ltd. (SHSE:600201) share price up 26% in a week. But that can't change the reality that over the longer term (five years), the returns have been really quite dismal. Indeed, the share price is down 61% in the period. Some might say the recent bounce is to be expected after such a bad drop. But it could be that the fall was overdone.

While the stock has risen 26% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

View our latest analysis for Jinyu Bio-technology

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).

During the five years over which the share price declined, Jinyu Bio-technology's earnings per share (EPS) dropped by 13% each year. This reduction in EPS is less than the 17% annual reduction in the share price. This implies that the market is more cautious about the business these days.

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

We know that Jinyu Bio-technology has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Jinyu Bio-technology will grow revenue in the future.

A Different Perspective

While the broader market gained around 3.3% in the last year, Jinyu Bio-technology shareholders lost 21% (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 10% per year over five years. 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. 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. For instance, we've identified 2 warning signs for Jinyu Bio-technology that you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.