The three-year shareholder returns and company earnings persist lower as Shenzhen Sunshine Laser & Electronics Technology (SZSE:300227) stock falls a further 14% in past week

For many investors, the main point of stock picking is to generate higher returns than the overall market. But the risk of stock picking is that you will likely buy under-performing companies. Unfortunately, that's been the case for longer term Shenzhen Sunshine Laser & Electronics Technology Co., Ltd. (SZSE:300227) shareholders, since the share price is down 43% in the last three years, falling well short of the market decline of around 22%. And over the last year the share price fell 27%, so we doubt many shareholders are delighted. Unfortunately the share price momentum is still quite negative, with prices down 19% in thirty days.

If the past week is anything to go by, investor sentiment for Shenzhen Sunshine Laser & Electronics Technology isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for Shenzhen Sunshine Laser & Electronics Technology

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...' 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.

During the three years that the share price fell, Shenzhen Sunshine Laser & Electronics Technology's earnings per share (EPS) dropped by 27% each year. This fall in the EPS is worse than the 17% 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 48.38.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It might be well worthwhile taking a look at our free report on Shenzhen Sunshine Laser & Electronics Technology's earnings, revenue and cash flow.

A Different Perspective

While the broader market lost about 10% in the twelve months, Shenzhen Sunshine Laser & Electronics Technology shareholders did even worse, losing 27%. 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 1.7% 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. 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. For instance, we've identified 3 warning signs for Shenzhen Sunshine Laser & Electronics Technology (1 is significant) that you should be aware of.

Of course Shenzhen Sunshine Laser & Electronics Technology 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.