Shenzhen Absen OptoelectronicLtd (SZSE:300389) shareholders have lost 31% over 1 year, earnings decline likely the culprit

Investors can approximate the average market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by Shenzhen Absen Optoelectronic Co.,Ltd. (SZSE:300389) shareholders over the last year, as the share price declined 32%. That's well below the market return of 6.1%. At least the damage isn't so bad if you look at the last three years, since the stock is down 21% in that time. The last week also saw the share price slip down another 9.9%. But this could be related to the soft market, which is down about 7.1% in the same period.

Since Shenzhen Absen OptoelectronicLtd has shed CN¥458m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out our latest analysis for Shenzhen Absen OptoelectronicLtd

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Unfortunately Shenzhen Absen OptoelectronicLtd reported an EPS drop of 32% for the last year. This change in EPS is remarkably close to the 32% decrease in the share price. So it seems that the market sentiment has not changed much, despite the weak results. Rather, the share price is remains a similar multiple of the EPS, suggesting the outlook remains the same.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

Dive deeper into Shenzhen Absen OptoelectronicLtd's key metrics by checking this interactive graph of Shenzhen Absen OptoelectronicLtd's earnings, revenue and cash flow.

A Different Perspective

While the broader market gained around 6.1% in the last year, Shenzhen Absen OptoelectronicLtd shareholders lost 31% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 0.7%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Shenzhen Absen OptoelectronicLtd better, we need to consider many other factors. For example, we've discovered 3 warning signs for Shenzhen Absen OptoelectronicLtd (1 is significant!) that you should be aware of before investing here.

We will like Shenzhen Absen OptoelectronicLtd better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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.