Hongli Zhihui GroupLtd (SZSE:300219) sheds CN¥396m, company earnings and investor returns have been trending downwards for past three years

Hongli Zhihui Group Co.,Ltd. (SZSE:300219) shareholders should be happy to see the share price up 25% in the last quarter. But that doesn't help the fact that the three year return is less impressive. Truth be told the share price declined 44% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

Since Hongli Zhihui GroupLtd has shed CN¥396m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Hongli Zhihui GroupLtd

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.

Hongli Zhihui GroupLtd saw its EPS decline at a compound rate of 2.9% per year, over the last three years. This reduction in EPS is slower than the 18% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.

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

It might be well worthwhile taking a look at our free report on Hongli Zhihui GroupLtd's earnings, revenue and cash flow.

A Different Perspective

Hongli Zhihui GroupLtd shareholders are down 22% for the year (even including dividends), but the market itself is up 2.1%. 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. On the bright side, long term shareholders have made money, with a gain of 5% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Hongli Zhihui GroupLtd better, we need to consider many other factors. For instance, we've identified 3 warning signs for Hongli Zhihui GroupLtd that you should be aware of.

Of course Hongli Zhihui GroupLtd 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.