Optimism for China Agri-Products Exchange (HKG:149) has grown this past week, despite one-year decline in earnings

Unless you borrow money to invest, the potential losses are limited. But if you pick the right business to buy shares in, you can make more than you can lose. For example, the China Agri-Products Exchange Limited (HKG:149) share price has soared 126% in the last 1 year. Most would be very happy with that, especially in just one year! It's even up 13% in the last week. On the other hand, longer term shareholders have had a tougher run, with the stock falling 10% in three years.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

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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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Over the last twelve months, China Agri-Products Exchange actually shrank its EPS by 44%. This was, in part, due to extraordinary items impacting earning in the last twelve months.

So we don't think that investors are paying too much attention to EPS. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.

Unfortunately China Agri-Products Exchange's fell 26% over twelve months. So using a snapshot of key business metrics doesn't give us a good picture of why the market is bidding up the stock.

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

Take a more thorough look at China Agri-Products Exchange's financial health with this free report on its balance sheet.

A Different Perspective

It's good to see that China Agri-Products Exchange has rewarded shareholders with a total shareholder return of 126% in the last twelve months. That certainly beats the loss of about 1.6% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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. For instance, we've identified 2 warning signs for China Agri-Products Exchange (1 doesn't sit too well with us) that you should be aware of.

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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.