Zhuzhou Hongda ElectronicsLtd (SZSE:300726) earnings and shareholder returns have been trending downwards for the last three years, but the stock ascends 5.1% this past week

Investing in stocks inevitably means buying into some companies that perform poorly. But the long term shareholders of Zhuzhou Hongda Electronics Corp.,Ltd. (SZSE:300726) have had an unfortunate run in the last three years. So they might be feeling emotional about the 61% share price collapse, in that time. In contrast, the stock price has popped 8.3% in the last thirty days. However, this may be a matter of broader market optimism, since stocks are up 4.6% in the same time.

Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.

View our latest analysis for Zhuzhou Hongda ElectronicsLtd

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Zhuzhou Hongda ElectronicsLtd saw its EPS decline at a compound rate of 25% per year, over the last three years. This fall in EPS isn't far from the rate of share price decline, which was 27% per year. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. Rather, the share price has approximately tracked EPS growth.

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 Zhuzhou Hongda ElectronicsLtd's earnings, revenue and cash flow.

A Different Perspective

It's good to see that Zhuzhou Hongda ElectronicsLtd has rewarded shareholders with a total shareholder return of 34% in the last twelve months. That's including the dividend. That's better than the annualised return of 3% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 - Zhuzhou Hongda ElectronicsLtd has 3 warning signs we think you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.