Investors can earn very close to the average market return by buying an index fund. But in any given year a good portion of stocks will fall short of that. Unfortunately for investors in Fujian Star-net Communication Co., LTD. (SZSE:002396), the share price has slipped 25% in three years, falling short of the marketdecline of 22%. And the ride hasn't got any smoother in recent times over the last year, with the price 23% lower in that time. Even worse, it's down 12% in about a month, which isn't fun at all. But this could be related to poor market conditions -- stocks are down 6.8% in the same time.

While the stock has risen 7.5% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

See our latest analysis for Fujian Star-net Communication

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

During the three years that the share price fell, Fujian Star-net Communication's earnings per share (EPS) dropped by 9.9% each year. This change in EPS is reasonably close to the 9% average annual decrease in the share price. That suggests that the market sentiment around the company hasn't changed much over that time, despite the disappointment. It seems like the share price is reflecting the declining earnings per share.

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

Dive deeper into Fujian Star-net Communication's key metrics by checking this interactive graph of Fujian Star-net Communication's earnings, revenue and cash flow.

A Different Perspective

We regret to report that Fujian Star-net Communication shareholders are down 23% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 18%. 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 1.9% over the last half decade. 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. It's always interesting to track share price performance over the longer term. But to understand Fujian Star-net Communication better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Fujian Star-net Communication you should know about.

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 Chinese 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.