XDC Industries (Shenzhen) (SZSE:300615) shareholders are up 14% this past week, but still in the red over the last five years

It is doubtless a positive to see that the XDC Industries (Shenzhen) Limited (SZSE:300615) share price has gained some 67% in the last three months. But if you look at the last five years the returns have not been good. After all, the share price is down 34% in that time, significantly under-performing the market.

On a more encouraging note the company has added CN¥339m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

Check out our latest analysis for XDC Industries (Shenzhen)

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.

Over five years XDC Industries (Shenzhen)'s earnings per share dropped significantly, falling to a loss, with the share price also lower. At present it's hard to make valid comparisons between EPS and the share price. However, we can say we'd expect to see a falling share price in this scenario.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

Dive deeper into XDC Industries (Shenzhen)'s key metrics by checking this interactive graph of XDC Industries (Shenzhen)'s earnings, revenue and cash flow.

A Different Perspective

XDC Industries (Shenzhen) shareholders are down 17% for the year (even including dividends), but the market itself is up 3.7%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6% per year over five years. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with XDC Industries (Shenzhen) (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

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.