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. That downside risk was realized by Tellgen Corporation (SZSE:300642) shareholders over the last year, as the share price declined 45%. That falls noticeably short of the market decline of around 11%. However, the longer term returns haven't been so bad, with the stock down 0.8% in the last three years. More recently, the share price has dropped a further 13% in a month. However, we note the price may have been impacted by the broader market, which is down 5.6% in the same time period.

Since Tellgen has shed CN¥359m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out our latest analysis for Tellgen

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.

Unhappily, Tellgen had to report a 12% decline in EPS over the last year. The share price decline of 45% is actually more than the EPS drop. This suggests the EPS fall has made some shareholders are more nervous about the business.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It might be well worthwhile taking a look at our free report on Tellgen's earnings, revenue and cash flow.

A Different Perspective

We regret to report that Tellgen shareholders are down 45% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 11%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5% over the last half decade. 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. 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. For instance, we've identified 2 warning signs for Tellgen that you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.