It is doubtless a positive to see that the Jiangsu Shagang Co., Ltd. (SZSE:002075) share price has gained some 37% in the last three months. But that doesn't change the fact that the returns over the last three years have been disappointing. In that time, the share price dropped 59%. So it's good to see it climbing back up. After all, could be that the fall was overdone.

On a more encouraging note the company has added CN¥439m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the three years that the share price fell, Jiangsu Shagang's earnings per share (EPS) dropped by 38% each year. In comparison the 26% compound annual share price decline isn't as bad as the EPS drop-off. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term. With a P/E ratio of 51.16, it's fair to say the market sees a brighter future for the business.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It might be well worthwhile taking a look at our free report on Jiangsu Shagang's earnings, revenue and cash flow.

A Different Perspective

It's nice to see that Jiangsu Shagang shareholders have received a total shareholder return of 9.4% over the last year. Of course, that includes the dividend. That certainly beats the loss of about 7% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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 instance, we've identified 4 warning signs for Jiangsu Shagang (2 are potentially serious) that you should be aware of.

But note: Jiangsu Shagang 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.