Shandong Hi-Speed New Energy Group's (HKG:1250) earnings have declined over five years, contributing to shareholders 63% loss

Shandong Hi-Speed New Energy Group Limited (HKG:1250) shareholders should be happy to see the share price up 24% in the last week. But that can't change the reality that over the longer term (five years), the returns have been really quite dismal. The share price has failed to impress anyone , down a sizable 63% during that time. So is the recent increase sufficient to restore confidence in the stock? Not yet. But it could be that the fall was overdone.

On a more encouraging note the company has added HK$786m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

Check out our latest analysis for Shandong Hi-Speed New Energy Group

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 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.

Looking back five years, both Shandong Hi-Speed New Energy Group's share price and EPS declined; the latter at a rate of 30% per year. The share price decline of 18% per year isn't as bad as the EPS decline. So the market may previously have expected a drop, or else it expects the situation will improve.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

This free interactive report on Shandong Hi-Speed New Energy Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Investors in Shandong Hi-Speed New Energy Group had a tough year, with a total loss of 39%, against a market gain of about 5.3%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 10% 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Shandong Hi-Speed New Energy Group (at least 2 which make us uncomfortable) , and understanding them should be part of your investment process.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.