Canadian Solar's (NASDAQ:CSIQ) earnings trajectory could turn positive as the stock swells 11% this past week

While not a mind-blowing move, it is good to see that the Canadian Solar Inc. (NASDAQ:CSIQ) share price has gained 13% in the last three months. But that's not enough to compensate for the decline over the last twelve months. Like a receding glacier in a warming world, the share price has melted 55% in that period. The share price recovery is not so impressive when you consider the fall. Of course, it could be that the fall was overdone.

The recent uptick of 11% could be a positive sign of things to come, so let's take a look at historical fundamentals.

Check out our latest analysis for Canadian Solar

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Unhappily, Canadian Solar had to report a 37% decline in EPS over the last year. The share price decline of 55% is actually more than the EPS drop. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock. The P/E ratio of 5.64 also points to the negative market sentiment.

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

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. Dive deeper into the earnings by checking this interactive graph of Canadian Solar's earnings, revenue and cash flow.

A Different Perspective

Investors in Canadian Solar had a tough year, with a total loss of 55%, against a market gain of about 24%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 3% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Canadian Solar better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Canadian Solar (of which 2 make us uncomfortable!) you should know about.

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 American 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com