Fujian Tianma Science and Technology Group Co., Ltd (SHSE:603668) shareholders might be concerned after seeing the share price drop 14% in the last quarter. But in three years the returns have been great. The share price marched upwards over that time, and is now 108% higher than it was. After a run like that some may not be surprised to see prices moderate. If the business can perform well for years to come, then the recent drop could be an opportunity.
After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.
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.
Over the last three years, Fujian Tianma Science and Technology Group failed to grow earnings per share, which fell 35% (annualized).
Thus, it seems unlikely that the market is focussed on EPS growth at the moment. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
Languishing at just 0.1%, we doubt the dividend is doing much to prop up the share price. It may well be that Fujian Tianma Science and Technology Group revenue growth rate of 25% over three years has convinced shareholders to believe in a brighter future. If the company is being managed for the long term good, today's shareholders might be right to hold on.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
While it's never nice to take a loss, Fujian Tianma Science and Technology Group shareholders can take comfort that , including dividends,their trailing twelve month loss of 14% wasn't as bad as the market loss of around 23%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 12% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. 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. Take risks, for example - Fujian Tianma Science and Technology Group has 1 warning sign we think you should be aware of.
We will like Fujian Tianma Science and Technology Group better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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.