Guangdong Fenghua Advanced Technology (Holding)'s (SZSE:000636) earnings trajectory could turn positive as the stock climbs 3.3% this past week

Investing in stocks inevitably means buying into some companies that perform poorly. Long term Guangdong Fenghua Advanced Technology (Holding) Co., Ltd. (SZSE:000636) shareholders know that all too well, since the share price is down considerably over three years. Sadly for them, the share price is down 51% in that time. Contrary to the longer term story, the last month has been good for stockholders, with a share price gain of 9.4%. However, this may be a matter of broader market optimism, since stocks are up 4.9% in the same time.

While the last three years has been tough for Guangdong Fenghua Advanced Technology (Holding) shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

View our latest analysis for Guangdong Fenghua Advanced Technology (Holding)

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 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.

During the three years that the share price fell, Guangdong Fenghua Advanced Technology (Holding)'s earnings per share (EPS) dropped by 30% each year. This fall in the EPS is worse than the 21% compound annual share price fall. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term. This positive sentiment is also reflected in the generous P/E ratio of 77.26.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

This free interactive report on Guangdong Fenghua Advanced Technology (Holding)'s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market lost about 8.2% in the twelve months, Guangdong Fenghua Advanced Technology (Holding) shareholders did even worse, losing 19% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 0.3% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. Before deciding if you like the current share price, check how Guangdong Fenghua Advanced Technology (Holding) scores on these 3 valuation metrics.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.