Earnings are growing at Hangzhou Jizhi Mechatronic (SZSE:300553) but shareholders still don't like its prospects

Taking the occasional loss comes part and parcel with investing on the stock market. Anyone who held Hangzhou Jizhi Mechatronic Co., Ltd. (SZSE:300553) over the last year knows what a loser feels like. The share price has slid 61% in that time. However, the longer term returns haven't been so bad, with the stock down 19% in the last three years. The falls have accelerated recently, with the share price down 21% in the last three months.

With the stock having lost 12% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

View our latest analysis for Hangzhou Jizhi Mechatronic

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 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.

Even though the Hangzhou Jizhi Mechatronic share price is down over the year, its EPS actually improved. Of course, the situation might betray previous over-optimism about growth.

It's surprising to see the share price fall so much, despite the improved EPS. So it's easy to justify a look at some other metrics.

Given the yield is quite low, at 0.3%, we doubt the dividend can shed much light on the share price. On the other hand, we're certainly perturbed by the 12% decline in Hangzhou Jizhi Mechatronic's revenue. Many investors see falling revenue as a likely precursor to lower earnings, so this could well explain the weak share price.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

We regret to report that Hangzhou Jizhi Mechatronic shareholders are down 61% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 17%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5% per year over five years. 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. 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. Take risks, for example - Hangzhou Jizhi Mechatronic has 1 warning sign we think you should be aware of.

We will like Hangzhou Jizhi Mechatronic 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com