Would Shareholders Who Purchased Dongguang Chemical's (HKG:1702) Stock Three Years Be Happy With The Share price Today?

While not a mind-blowing move, it is good to see that the Dongguang Chemical Limited (HKG:1702) share price has gained 14% in the last three months. Meanwhile over the last three years the stock has dropped hard. Regrettably, the share price slid 64% in that period. So it's good to see it climbing back up. After all, could be that the fall was overdone.

See our latest analysis for Dongguang Chemical

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Although the share price is down over three years, Dongguang Chemical actually managed to grow EPS by 35% per year in that time. 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.

Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

Revenue is actually up 6.5% over the three years, so the share price drop doesn't seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching Dongguang Chemical more closely, as sometimes stocks fall unfairly. This could present an opportunity.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

This free interactive report on Dongguang Chemical's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Dongguang Chemical shareholders are down 27% for the year, (even including dividends), but the broader market is up 29%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Unfortunately, the longer term story isn't pretty, with investment losses running at 18% per year over three years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. 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 1 warning sign with Dongguang Chemical , and understanding them should be part of your investment process.

Of course Dongguang Chemical 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 HK exchanges.

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This article by Simply Wall St is general in nature. 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.
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