Shenzhen Kangtai Biological Products (SZSE:300601) sheds CN¥1.2b, company earnings and investor returns have been trending downwards for past three years

It is doubtless a positive to see that the Shenzhen Kangtai Biological Products Co., Ltd. (SZSE:300601) share price has gained some 39% in the last three months. But only the myopic could ignore the astounding decline over three years. Indeed, the share price is down a whopping 72% in the last three years. Arguably, the recent bounce is to be expected after such a bad drop. Of course the real question is whether the business can sustain a turnaround.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

See our latest analysis for Shenzhen Kangtai Biological Products

There is no denying that markets are sometimes efficient, but prices do not always reflect 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.

Shenzhen Kangtai Biological Products saw its EPS decline at a compound rate of 27% per year, over the last three years. This reduction in EPS is slower than the 35% annual reduction in the share price. So it seems the market was too confident about the business, in the past.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Shenzhen Kangtai Biological Products has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

A Different Perspective

Investors in Shenzhen Kangtai Biological Products had a tough year, with a total loss of 35% (including dividends), against a market gain of about 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 11% over the last half decade. 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 Shenzhen Kangtai Biological Products better, we need to consider many other factors. Even so, be aware that Shenzhen Kangtai Biological Products is showing 3 warning signs in our investment analysis , you should know about...

If you are like me, then you will not want to miss this free list of undervalued small caps 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.