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It might be of some concern to shareholders to see the Shanghai Fudan Microelectronics Group Company Limited (HKG:1385) share price down 19% in the last month. But that doesn't change the fact that the returns over the last three years have been respectable. It beat the market return of 35% in that time, gaining 37%.
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. 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).
Over the last three years, Shanghai Fudan Microelectronics Group failed to grow earnings per share, which fell 14% (annualized). This means it's unlikely the market is judging the company based on earnings growth. Therefore, we think it's worth considering other metrics as well.
It may well be that Shanghai Fudan Microelectronics Group revenue growth rate of 12% over three years has convinced shareholders to believe in a brighter future. If the company is being managed for the long term good, today's shareholders might be right to hold on.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
Take a more thorough look at Shanghai Fudan Microelectronics Group's financial health with this free report on its balance sheet.
A Different Perspective
Although it hurts that Shanghai Fudan Microelectronics Group returned a loss of 3.5% in the last twelve months, the broader market was actually worse, returning a loss of 12%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 1.7% for each year. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. Before forming an opinion on Shanghai Fudan Microelectronics Group you might want to consider these 3 valuation metrics.
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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.