As Xinyi Electric Storage Holdings (HKG:8328) soars 37% this past week, investors may now be noticing the company's three-year earnings growth

Xinyi Electric Storage Holdings Limited (HKG:8328) shareholders are doubtless heartened to see the share price bounce 37% in just one week. But the last three years have seen a terrible decline. In that time the share price has melted like a snowball in the desert, down 74%. So it's about time shareholders saw some gains. But the more important question is whether the underlying business can justify a higher price still.

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.

Check out our latest analysis for Xinyi Electric Storage Holdings

There is no denying that markets are sometimes efficient, but prices do not always reflect 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.

During the unfortunate three years of share price decline, Xinyi Electric Storage Holdings actually saw its earnings per share (EPS) improve by 50% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.

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

Revenue is actually up 46% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating Xinyi Electric Storage Holdings 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).

Take a more thorough look at Xinyi Electric Storage Holdings' financial health with this free report on its balance sheet.

A Different Perspective

While the broader market gained around 19% in the last year, Xinyi Electric Storage Holdings shareholders lost 38%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 3%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Take risks, for example - Xinyi Electric Storage Holdings has 1 warning sign we think you should be aware of.

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 Hong Kong 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.