The total return for Sichuan Huiyuan Optical Communication (SZSE:000586) investors has risen faster than earnings growth over the last three years

The Sichuan Huiyuan Optical Communication Co., Ltd. (SZSE:000586) share price has had a bad week, falling 14%. But don't let that distract from the very nice return generated over three years. In the last three years the share price is up, 47%: better than the market.

Since the long term performance has been good but there's been a recent pullback of 14%, let's check if the fundamentals match the share price.

Check out our latest analysis for Sichuan Huiyuan Optical Communication

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During three years of share price growth, Sichuan Huiyuan Optical Communication achieved compound earnings per share growth of 20% per year. The average annual share price increase of 14% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat. Of course, with a P/E ratio of 109.41, the market remains optimistic.

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

This free interactive report on Sichuan Huiyuan Optical Communication's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

We regret to report that Sichuan Huiyuan Optical Communication shareholders are down 17% for the year. Unfortunately, that's worse than the broader market decline of 14%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 0.5% 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 Sichuan Huiyuan Optical Communication better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Sichuan Huiyuan Optical Communication (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

We will like Sichuan Huiyuan Optical Communication better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider 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.