Positive earnings growth hasn't been enough to get Longshine Technology Group (SZSE:300682) shareholders a favorable return over the last year

Taking the occasional loss comes part and parcel with investing on the stock market. And unfortunately for Longshine Technology Group Co., Ltd. (SZSE:300682) shareholders, the stock is a lot lower today than it was a year ago. To wit the share price is down 62% in that time. To make matters worse, the returns over three years have also been really disappointing (the share price is 49% lower than three years ago). The falls have accelerated recently, with the share price down 27% in the last three months.

On a more encouraging note the company has added CN¥377m to its market cap in just the last 7 days, so let's see if we can determine what's driven the one-year loss for shareholders.

Check out our latest analysis for Longshine Technology Group

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Even though the Longshine Technology Group share price is down over the year, its EPS actually improved. It's quite possible that growth expectations may have been unreasonable in the past.

The divergence between the EPS and the share price is quite notable, during the year. But we might find some different metrics explain the share price movements better.

Longshine Technology Group's revenue is actually up 8.7% over the last year. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We know that Longshine Technology Group has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling Longshine Technology Group stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

While the broader market lost about 17% in the twelve months, Longshine Technology Group shareholders did even worse, losing 61% (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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4% per year over five years. 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with Longshine Technology Group .

But note: Longshine Technology Group may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com