It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But if you buy shares in a really great company, you can more than double your money. For instance the Zhejiang Huatong Meat Products Co., Ltd. (SZSE:002840) share price is 116% higher than it was three years ago. Most would be happy with that. Also pleasing for shareholders was the 31% gain in the last three months. But this could be related to the strong market, which is up 14% in the last three months.
Since it's been a strong week for Zhejiang Huatong Meat Products shareholders, let's have a look at trend of the longer term fundamentals.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 three years of share price growth, Zhejiang Huatong Meat Products actually saw its earnings per share (EPS) drop 69% per year.
So we doubt that the market is looking to EPS for its main judge of the company's value. Given this situation, it makes sense to look at other metrics too.
We severely doubt anyone is particularly impressed with the modest 0.7% three-year revenue growth rate. While we don't have an obvious theory to explain the share price rise, a closer look at the data might be enlightening.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
If you are thinking of buying or selling Zhejiang Huatong Meat Products stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
We're pleased to report that Zhejiang Huatong Meat Products shareholders have received a total shareholder return of 45% over one year. That gain is better than the annual TSR over five years, which is 16%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Zhejiang Huatong Meat Products , and understanding them should be part of your investment process.
If you are like me, then you will not want to miss this free list of growing companies that insiders are 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.