It's easy to match the overall market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. For example, the Jiangsu Linyang Energy Co., Ltd. (SHSE:601222) share price is down 45% in the last year. That contrasts poorly with the market decline of 16%. The silver lining (for longer term investors) is that the stock is still 44% higher than it was three years ago. Even worse, it's down 20% in about a month, which isn't fun at all. However, we note the price may have been impacted by the broader market, which is down 8.1% in the same time period.

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

Check out our latest analysis for Jiangsu Linyang Energy

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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, Jiangsu Linyang Energy had to report a 30% decline in EPS over the last year. This reduction in EPS is not as bad as the 45% share price fall. This suggests the EPS fall has made some shareholders are more nervous about the business.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

We regret to report that Jiangsu Linyang Energy shareholders are down 43% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 16%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 3% 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. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Jiangsu Linyang Energy , and understanding them should be part of your investment process.

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 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.