Earnings are growing at Jiangsu New Energy Development (SHSE:603693) but shareholders still don't like its prospects

While not a mind-blowing move, it is good to see that the Jiangsu New Energy Development Co., Ltd. (SHSE:603693) share price has gained 20% in the last three months. But over the last three years we've seen a quite serious decline. Tragically, the share price declined 59% in that time. So it is really good to see an improvement. While many would remain nervous, there could be further gains if the business can put its best foot forward.

With the stock having lost 4.4% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

See our latest analysis for Jiangsu New Energy Development

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).

Although the share price is down over three years, Jiangsu New Energy Development actually managed to grow EPS by 37% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

The modest 1.5% dividend yield is unlikely to be guiding the market view of the stock. We note that, in three years, revenue has actually grown at a 3.0% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating Jiangsu New Energy Development further; while we may be missing something on this analysis, there might also be an opportunity.

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

Investors in Jiangsu New Energy Development had a tough year, with a total loss of 12% (including dividends), against a market gain of about 14%. 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 6%, 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 2 warning signs for Jiangsu New Energy Development you should be aware of, and 1 of them is a bit concerning.

Of course Jiangsu New Energy Development may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.