Positive earnings growth hasn't been enough to get Xinyi Electric Storage Holdings (HKG:8328) shareholders a favorable return over the last three years

Xinyi Electric Storage Holdings Limited (HKG:8328) shareholders should be happy to see the share price up 15% in the last month. But that is small recompense for the exasperating returns over three years. Indeed, the share price is down a tragic 62% in the last three years. Some might say the recent bounce is to be expected after such a bad drop. Perhaps the company has turned over a new leaf.

While the last three years has been tough for Xinyi Electric Storage Holdings shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

See our latest analysis for Xinyi Electric Storage Holdings

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.

Although the share price is down over three years, Xinyi Electric Storage Holdings actually managed to grow EPS by 16% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). 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 64% 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.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

If you are thinking of buying or selling Xinyi Electric Storage Holdings stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While the broader market lost about 13% in the twelve months, Xinyi Electric Storage Holdings shareholders did even worse, losing 62%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.1% over the last half decade. 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. 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 growing 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.