Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. Unfortunately the Shanghai Foreign Service Holding Group CO.,Ltd. (SHSE:600662) share price slid 31% over twelve months. That's well below the market decline of 16%. On the bright side, the stock is actually up 8.1% in the last three years. The falls have accelerated recently, with the share price down 15% in the last three months. Of course, this share price action may well have been influenced by the 6.4% decline in the broader market, throughout the period.

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

See our latest analysis for Shanghai Foreign Service Holding GroupLtd

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Unhappily, Shanghai Foreign Service Holding GroupLtd had to report a 44% decline in EPS over the last year. The share price fall of 31% isn't as bad as the reduction in earnings per share. So despite the weak per-share profits, some investors are probably relieved the situation wasn't more difficult.

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

Dive deeper into Shanghai Foreign Service Holding GroupLtd's key metrics by checking this interactive graph of Shanghai Foreign Service Holding GroupLtd's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Shanghai Foreign Service Holding GroupLtd the TSR over the last 1 year was -28%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market lost about 16% in the twelve months, Shanghai Foreign Service Holding GroupLtd shareholders did even worse, losing 28% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4% 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 Shanghai Foreign Service Holding GroupLtd better, we need to consider many other factors. Even so, be aware that Shanghai Foreign Service Holding GroupLtd is showing 3 warning signs in our investment analysis , you should know about...

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.

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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.