Investors are understandably disappointed when a stock they own declines in value. But it can difficult to make money in a declining market. While the Jilin Sino-Microelectronics Co., Ltd. (SHSE:600360) share price is down 12% in the last three years, the total return to shareholders (which includes dividends) was -12%. And that total return actually beats the market decline of 19%. On the other hand the share price has bounced 7.4% over the last week.
While the stock has risen 7.4% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Although the share price is down over three years, Jilin Sino-Microelectronics actually managed to grow EPS by 15% per year in that time. 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.
It is a little bizarre to see the share price down, despite a strong improvement to earnings per share. So we'll have to take a look at other metrics to try to understand the price action.
The modest 0.3% dividend yield is unlikely to be guiding the market view of the stock. With revenue flat over three years, it seems unlikely that the share price is reflecting the top line. There doesn't seem to be any clear correlation between the fundamental business metrics and the share price. That could mean that the stock was previously overrated, or it could spell opportunity now.
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
Although it hurts that Jilin Sino-Microelectronics returned a loss of 11% in the last twelve months, the broader market was actually worse, returning a loss of 13%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 1.8% 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. It's always interesting to track share price performance over the longer term. But to understand Jilin Sino-Microelectronics better, we need to consider many other factors. Take risks, for example - Jilin Sino-Microelectronics has 4 warning signs (and 2 which are concerning) we think you should know about.
We will like Jilin Sino-Microelectronics 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.