United Strength Power Holdings Limited (HKG:2337) shareholders should be happy to see the share price up 17% in the last week. But the last three years have seen a terrible decline. In that time the share price has melted like a snowball in the desert, down 86%. So it's about time shareholders saw some gains. But the more important question is whether the underlying business can justify a higher price still. While a drop like that is definitely a body blow, money isn't as important as health and happiness.

The recent uptick of 17% could be a positive sign of things to come, so let's take a look at historical fundamentals.

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, United Strength Power Holdings' earnings per share (EPS) dropped by 32% each year. The share price decline of 48% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy. This increased caution is also evident in the rather low P/E ratio, which is sitting at 9.78.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

This free interactive report on United Strength Power Holdings' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market gained around 34% in the last year, United Strength Power Holdings shareholders lost 60%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 11% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand United Strength Power Holdings better, we need to consider many other factors. Take risks, for example - United Strength Power Holdings has 3 warning signs (and 2 which can't be ignored) we think you should know about.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong exchanges.

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