Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. That downside risk was realized by Suzhou HYC Technology Co.,Ltd. (SHSE:688001) shareholders over the last year, as the share price declined 38%. That falls noticeably short of the market decline of around 15%. Because Suzhou HYC TechnologyLtd hasn't been listed for many years, the market is still learning about how the business performs. Shareholders have had an even rougher run lately, with the share price down 37% in the last 90 days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

On a more encouraging note the company has added CN¥681m to its market cap in just the last 7 days, so let's see if we can determine what's driven the one-year loss for shareholders.

Check out our latest analysis for Suzhou HYC TechnologyLtd

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.

Even though the Suzhou HYC TechnologyLtd share price is down over the year, its EPS actually improved. Of course, the situation might betray previous over-optimism about growth.

The divergence between the EPS and the share price is quite notable, during the year. So it's easy to justify a look at some other metrics.

With a low yield of 1.0% we doubt that the dividend influences the share price much. Suzhou HYC TechnologyLtd's revenue is actually up 18% over the last year. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

We know that Suzhou HYC TechnologyLtd has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Suzhou HYC TechnologyLtd in this interactive graph of future profit estimates.

A Different Perspective

Suzhou HYC TechnologyLtd shareholders are down 38% for the year (even including dividends), even worse than the market loss of 15%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. With the stock down 37% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Suzhou HYC TechnologyLtd (at least 1 which is concerning) , and understanding them should be part of your investment process.

For those who like to find winning investments this free list of growing 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 CN 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.