The 11% return this week takes Nanhua Instruments' (SZSE:300417) shareholders one-year gains to 115%

Nanhua Instruments Co., Ltd. (SZSE:300417) shareholders might be concerned after seeing the share price drop 12% in the last quarter. Despite this, the stock is a strong performer over the last year, no doubt about that. During that period, the share price soared a full 113%. So it may be that the share price is simply cooling off after a strong rise. More important, going forward, is how the business itself is going.

The past week has proven to be lucrative for Nanhua Instruments investors, so let's see if fundamentals drove the company's one-year performance.

See our latest analysis for Nanhua Instruments

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Nanhua Instruments went from making a loss to reporting a profit, in the last year.

When a company has just transitioned to profitability, earnings per share growth is not always the best way to look at the share price action.

We doubt the modest 1.3% dividend yield is doing much to support the share price. Nanhua Instruments' revenue actually dropped 22% over last year. So the fundamental metrics don't provide an obvious explanation for the share price gain.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free interactive report on Nanhua Instruments' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

We're pleased to report that Nanhua Instruments shareholders have received a total shareholder return of 115% over one year. And that does include the dividend. That certainly beats the loss of about 7% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. 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 example, we've discovered 4 warning signs for Nanhua Instruments (1 is a bit concerning!) that you should be aware of before investing here.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.