It's nice to see the HMT (Xiamen) New Technical Materials Co., Ltd (SHSE:603306) share price up 17% in a week. But that is minimal compensation for the share price under-performance over the last year. After all, the share price is down 42% in the last year, significantly under-performing the market.
On a more encouraging note the company has added CN¥1.0b to its market cap in just the last 7 days, so let's see if we can determine what's driven the one-year loss for shareholders.
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.
During the unfortunate twelve months during which the HMT (Xiamen) New Technical Materials share price fell, it actually saw its earnings per share (EPS) improve by 32%. It could be that the share price was previously over-hyped.
The divergence between the EPS and the share price is quite notable, during the year. But we might find some different metrics explain the share price movements better.
Given the yield is quite low, at 0.9%, we doubt the dividend can shed much light on the share price. HMT (Xiamen) New Technical Materials managed to grow revenue over the last year, which is usually a real positive. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We know that HMT (Xiamen) New Technical Materials has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling HMT (Xiamen) New Technical Materials stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
We regret to report that HMT (Xiamen) New Technical Materials shareholders are down 42% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 15%. 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. Longer term investors wouldn't be so upset, since they would have made 7%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with HMT (Xiamen) New Technical Materials , and understanding them should be part of your investment process.
But note: HMT (Xiamen) New Technical Materials 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.