This month, we saw the Xin Yuan Enterprises Group Limited (HKG:1748) up an impressive 34%. But that doesn't change the fact that the returns over the last year have been disappointing. Like an arid lake in a warming world, shareholder value has evaporated, with the share price down 60% in that time. It's not that amazing to see a bounce after a drop like that. Arguably, the fall was overdone.
While the stock has risen 27% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.
See our latest analysis for Xin Yuan Enterprises Group
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
During the unfortunate twelve months during which the Xin Yuan Enterprises Group share price fell, it actually saw its earnings per share (EPS) improve by 15%. It's quite possible that growth expectations may have been unreasonable in the past.
It's fair to say that the share price does not seem to be reflecting the EPS growth. So it's easy to justify a look at some other metrics.
On the other hand, we're certainly perturbed by the 3.0% decline in Xin Yuan Enterprises Group's revenue. Many investors see falling revenue as a likely precursor to lower earnings, so this could well explain the weak share price.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
While the broader market gained around 31% in the last year, Xin Yuan Enterprises Group shareholders lost 60%. 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. Longer term investors wouldn't be so upset, since they would have made 8%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. For instance, we've identified 1 warning sign for Xin Yuan Enterprises Group that you should be aware of.
For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.
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.