16% earnings growth over 3 years has not materialized into gains for Shanghai Hile Bio-Technology (SHSE:603718) shareholders over that period

If you love investing in stocks you're bound to buy some losers. But the long term shareholders of Shanghai Hile Bio-Technology Co., Ltd. (SHSE:603718) have had an unfortunate run in the last three years. Sadly for them, the share price is down 57% in that time. And over the last year the share price fell 30%, so we doubt many shareholders are delighted. More recently, the share price has dropped a further 22% in a month.

If the past week is anything to go by, investor sentiment for Shanghai Hile Bio-Technology isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

Check out our latest analysis for Shanghai Hile Bio-Technology

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Although the share price is down over three years, Shanghai Hile Bio-Technology actually managed to grow EPS by 55% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

The modest 0.4% dividend yield is unlikely to be guiding the market view of the stock. Arguably the revenue decline of 12% per year has people thinking Shanghai Hile Bio-Technology 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 Shanghai Hile Bio-Technology stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While the broader market lost about 12% in the twelve months, Shanghai Hile Bio-Technology shareholders did even worse, losing 29% (even including dividends). 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 8% 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. It's always interesting to track share price performance over the longer term. But to understand Shanghai Hile Bio-Technology better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Shanghai Hile Bio-Technology you should know about.

Of course Shanghai Hile Bio-Technology 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.