The Guoguang Electric Company Limited (SZSE:002045) share price has had a bad week, falling 12%. But that doesn't change the fact that the returns over the last five years have been pleasing. Its return of 36% has certainly bested the market return! While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 22% drop, in the last year.
While the stock has fallen 12% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.
See our latest analysis for Guoguang Electric
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
During the last half decade, Guoguang Electric became profitable. That's generally thought to be a genuine positive, so investors may expect to see an increasing share price. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the Guoguang Electric share price is up 15% in the last three years. Meanwhile, EPS is up 9.1% per year. This EPS growth is higher than the 5% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Guoguang Electric has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.
While the broader market lost about 0.6% in the twelve months, Guoguang Electric shareholders did even worse, losing 22%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 7% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Guoguang Electric better, we need to consider many other factors. Even so, be aware that Guoguang Electric is showing 2 warning signs in our investment analysis , you should know about...
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese 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.