While Shanghai Fullhan Microelectronics Co., Ltd. (SZSE:300613) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 23% in the last quarter. On the bright side the returns have been quite good over the last half decade. Its return of 55% 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 46% drop, in the last year.
Since the stock has added CN¥461m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 half a decade, Shanghai Fullhan Microelectronics managed to grow its earnings per share at 26% a year. This EPS growth is higher than the 9% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.
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 Shanghai Fullhan Microelectronics has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Shanghai Fullhan Microelectronics' balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
While the broader market lost about 19% in the twelve months, Shanghai Fullhan Microelectronics shareholders did even worse, losing 46% (even including dividends). 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. On the bright side, long term shareholders have made money, with a gain of 9% 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 Shanghai Fullhan Microelectronics better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Shanghai Fullhan Microelectronics .
But note: Shanghai Fullhan Microelectronics may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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.