Investors three-year losses continue as Asymchem Laboratories (Tianjin) (SZSE:002821) dips a further 5.2% this week, earnings continue to decline

It is a pleasure to report that the Asymchem Laboratories (Tianjin) Co., Ltd. (SZSE:002821) is up 34% in the last quarter. But that is meagre solace in the face of the shocking decline over three years. In that time the share price has melted like a snowball in the desert, down 78%. Arguably, the recent bounce is to be expected after such a bad drop. Only time will tell if the company can sustain the turnaround.

If the past week is anything to go by, investor sentiment for Asymchem Laboratories (Tianjin) isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

Check out our latest analysis for Asymchem Laboratories (Tianjin)

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

Asymchem Laboratories (Tianjin) saw its EPS decline at a compound rate of 7.0% per year, over the last three years. This reduction in EPS is slower than the 39% annual reduction in the share price. So it seems the market was too confident about the business, in the past.

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

It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. It might be well worthwhile taking a look at our free report on Asymchem Laboratories (Tianjin)'s earnings, revenue and cash flow.

A Different Perspective

While the broader market gained around 5.3% in the last year, Asymchem Laboratories (Tianjin) shareholders lost 42% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.5% 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. Take risks, for example - Asymchem Laboratories (Tianjin) has 2 warning signs we think you should be aware of.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are 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.