The simplest way to benefit from a rising market is to buy an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by Shanghai Zhonggu Logistics Co., Ltd. (SHSE:603565) shareholders over the last year, as the share price declined 28%. That's disappointing when you consider the market declined 9.6%. Because Shanghai Zhonggu Logistics hasn't been listed for many years, the market is still learning about how the business performs.

If the past week is anything to go by, investor sentiment for Shanghai Zhonggu Logistics isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for Shanghai Zhonggu Logistics

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 unfortunate twelve months during which the Shanghai Zhonggu Logistics share price fell, it actually saw its earnings per share (EPS) improve by 115%. It could be that the share price was previously over-hyped.

The divergence between the EPS and the share price is quite notable, during the year. But we might find some different metrics explain the share price movements better.

We don't see any weakness in the Shanghai Zhonggu Logistics' dividend so the steady payout can't really explain the share price drop. The revenue trend doesn't seem to explain why the share price is down. Unless, of course, the market was expecting a revenue uptick.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

It is of course excellent to see how Shanghai Zhonggu Logistics has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Shanghai Zhonggu Logistics, it has a TSR of -24% for the last 1 year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Shanghai Zhonggu Logistics shareholders are down 24% for the year (even including dividends), even worse than the market loss of 9.6%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. It's great to see a nice little 0.2% rebound in the last three months. This could just be a bounce because the selling was too aggressive, but fingers crossed it's the start of a new trend. 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. To that end, you should be aware of the 3 warning signs we've spotted with Shanghai Zhonggu Logistics .

Of course Shanghai Zhonggu Logistics may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.