Did Business Growth Power China Automotive Systems' (NASDAQ:CAAS) Share Price Gain of 128%?

China Automotive Systems, Inc. (NASDAQ:CAAS) shareholders might understandably be very concerned that the share price has dropped 38% in the last quarter. But that doesn't detract from the splendid returns of the last year. Like an eagle, the share price soared 128% in that time. So we think most shareholders won't be too upset about the recent fall. The real question is whether the business is trending in the right direction.

See our latest analysis for China Automotive Systems

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 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).

During the last year China Automotive Systems saw its earnings per share (EPS) drop below zero. While some may see this as temporary, we're a skeptical bunch, and so we're a little surprised to see the share price go up. We might get a clue to explain the share price move by looking to other metrics.

Unfortunately China Automotive Systems' fell 12% over twelve months. So the fundamental metrics don't provide an obvious explanation for the share price gain.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free report showing analyst forecasts should help you form a view on China Automotive Systems

A Different Perspective

It's good to see that China Automotive Systems has rewarded shareholders with a total shareholder return of 128% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 3% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand China Automotive Systems better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with China Automotive Systems , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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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