In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But even the best stock picker will only win with some selections. At this point some shareholders may be questioning their investment in Maanshan Iron & Steel Company Limited (HKG:323), since the last five years saw the share price fall 56%. We also note that the stock has performed poorly over the last year, with the share price down 53%. The falls have accelerated recently, with the share price down 30% in the last three months. But this could be related to the weak market, which is down 19% in the same period.

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

Check out our latest analysis for Maanshan Iron & Steel

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Looking back five years, both Maanshan Iron & Steel's share price and EPS declined; the latter at a rate of 2.6% per year. This reduction in EPS is less than the 15% annual reduction in the share price. This implies that the market was previously too optimistic about the stock. The less favorable sentiment is reflected in its current P/E ratio of 5.63.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

Dive deeper into Maanshan Iron & Steel's key metrics by checking this interactive graph of Maanshan Iron & Steel's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Maanshan Iron & Steel the TSR over the last 5 years was -33%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While the broader market lost about 22% in the twelve months, Maanshan Iron & Steel shareholders did even worse, losing 45% (even including dividends). 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 6% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for Maanshan Iron & Steel (1 is potentially serious!) that you should be aware of before investing here.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.