It's easy to match the overall market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Investors in Kangji Medical Holdings Limited (HKG:9997) have tasted that bitter downside in the last year, as the share price dropped 51%. That's well below the market decline of 23%. Because Kangji Medical Holdings hasn't been listed for many years, the market is still learning about how the business performs. Furthermore, it's down 20% in about a quarter. That's not much fun for holders. Of course, this share price action may well have been influenced by the 8.6% decline in the broader market, throughout the period.

With the stock having lost 8.1% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for Kangji Medical Holdings

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Even though the Kangji Medical Holdings share price is down over the year, its EPS actually improved. It could be that the share price was previously over-hyped.

It's fair to say that the share price does not seem to be reflecting the EPS growth. But we might find some different metrics explain the share price movements better.

Kangji Medical Holdings managed to grow revenue over the last year, which is usually a real positive. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

We know that Kangji Medical Holdings has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling Kangji Medical Holdings stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

Kangji Medical Holdings shareholders are down 50% for the year (even including dividends), even worse than the market loss of 23%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. With the stock down 20% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. It's always interesting to track share price performance over the longer term. But to understand Kangji Medical Holdings better, we need to consider many other factors. Even so, be aware that Kangji Medical Holdings is showing 2 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

We will like Kangji Medical Holdings better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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