Despite lower earnings than three years ago, Chengdu Information Technology of Chinese Academy of SciencesLtd (SZSE:300678) investors are up 134% since then

While Chengdu Information Technology of Chinese Academy of Sciences Co.,Ltd (SZSE:300678) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 25% in the last quarter. But in three years the returns have been great. Indeed, the share price is up a very strong 132% in that time. So the recent fall in the share price should be viewed in that context. The thing to consider is whether the underlying business is doing well enough to support the current price.

Since the long term performance has been good but there's been a recent pullback of 6.0%, let's check if the fundamentals match the share price.

View our latest analysis for Chengdu Information Technology of Chinese Academy of SciencesLtd

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Over the last three years, Chengdu Information Technology of Chinese Academy of SciencesLtd failed to grow earnings per share, which fell 15% (annualized).

Thus, it seems unlikely that the market is focussed on EPS growth at the moment. Given this situation, it makes sense to look at other metrics too.

The modest 0.2% dividend yield is unlikely to be propping up the share price. It could be that the revenue growth of 6.9% per year is viewed as evidence that Chengdu Information Technology of Chinese Academy of SciencesLtd is growing. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder's faith in better days ahead will be rewarded.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Take a more thorough look at Chengdu Information Technology of Chinese Academy of SciencesLtd's financial health with this free report on its balance sheet.

A Different Perspective

While the broader market lost about 8.9% in the twelve months, Chengdu Information Technology of Chinese Academy of SciencesLtd shareholders did even worse, losing 43% (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. Longer term investors wouldn't be so upset, since they would have made 13%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. For example, we've discovered 2 warning signs for Chengdu Information Technology of Chinese Academy of SciencesLtd that you should be aware of before investing here.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.