For many investors, the main point of stock picking is to generate higher returns than the overall market. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term China Shanshui Cement Group Limited (HKG:691) shareholders have had that experience, with the share price dropping 27% in three years, versus a market decline of about 2.4%. Furthermore, it's down 12% in about a quarter. That's not much fun for holders. However, one could argue that the price has been influenced by the general market, which is down 11% in the same timeframe.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

See our latest analysis for China Shanshui Cement Group

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 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 three years that the share price fell, China Shanshui Cement Group's earnings per share (EPS) dropped by 10% each year. This change in EPS is reasonably close to the 10% average annual decrease in the share price. So it seems like sentiment towards the stock hasn't changed all that much over time. Rather, the share price has approximately tracked EPS growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

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

A Different Perspective

China Shanshui Cement Group shareholders may not have made money over the last year, but their total loss of 11% ( including dividends) isn't as bad as the market loss of around 11%. Unfortunately, last year's performance may indicate unresolved challenges, given that it's even worse than the annualised loss of 8% over the last three years. Whilst Baron Rothschild does say to "buy when there's blood in the streets, even if the blood is your own", buyers would need to examine the data carefully to be comfortable that the business itself is sound. It's always interesting to track share price performance over the longer term. But to understand China Shanshui Cement Group better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for China Shanshui Cement Group you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.