The three-year underlying earnings growth at Asymchem Laboratories (Tianjin) (SZSE:002821) is promising, but the shareholders are still in the red over that time

Every investor on earth makes bad calls sometimes. But you have a problem if you face massive losses more than once in a while. So consider, for a moment, the misfortune of Asymchem Laboratories (Tianjin) Co., Ltd. (SZSE:002821) investors who have held the stock for three years as it declined a whopping 74%. That would be a disturbing experience. The more recent news is of little comfort, with the share price down 45% in a year. The falls have accelerated recently, with the share price down 25% in the last three months.

With the stock having lost 3.4% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

View our latest analysis for Asymchem Laboratories (Tianjin)

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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, Asymchem Laboratories (Tianjin) actually managed to grow EPS by 33% 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.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

We note that, in three years, revenue has actually grown at a 27% annual rate, so that doesn't seem to be a reason to sell shares. This analysis is just perfunctory, but it might be worth researching Asymchem Laboratories (Tianjin) more closely, as sometimes stocks fall unfairly. This could present an opportunity.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Asymchem Laboratories (Tianjin) is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Asymchem Laboratories (Tianjin) stock, you should check out this free report showing analyst consensus estimates for future profits.

A Different Perspective

We regret to report that Asymchem Laboratories (Tianjin) shareholders are down 44% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 12%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Asymchem Laboratories (Tianjin) , and understanding them should be part of your investment process.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.