While it may not be enough for some shareholders, we think it is good to see the Zhejiang Zhongcheng Packing Material Co., Ltd. (SZSE:002522) share price up 19% in a single quarter. But that is little comfort to those holding over the last half decade, sitting on a big loss. Indeed, the share price is down 58% in the period. Some might say the recent bounce is to be expected after such a bad drop. We'd err towards caution given the long term under-performance.

Although the past week has been more reassuring for shareholders, they're still in the red over the last five years, so let's see if the underlying business has been responsible for the decline.

Check out our latest analysis for Zhejiang Zhongcheng Packing Material

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.

While the share price declined over five years, Zhejiang Zhongcheng Packing Material actually managed to increase EPS by an average of 12% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

Due to the lack of correlation between the EPS growth and the falling share price, it's worth taking a look at other metrics to try to understand the share price movement.

We don't think that the 0.5% is big factor in the share price, since it's quite small, as dividends go. In contrast to the share price, revenue has actually increased by 23% a year in the five year period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Take a more thorough look at Zhejiang Zhongcheng Packing Material's financial health with this free report on its balance sheet.

A Different Perspective

We regret to report that Zhejiang Zhongcheng Packing Material shareholders are down 13% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 9.5%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, longer term shareholders are suffering worse, given the loss of 9% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. 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 example, we've discovered 1 warning sign for Zhejiang Zhongcheng Packing Material that you should be aware of before investing here.

For those who like to find winning investments this free list of growing 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 CN 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.