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. Investors in Jiangsu Hanvo Safety Product Co., Ltd. (SZSE:300952) have tasted that bitter downside in the last year, as the share price dropped 42%. That's well below the market decline of 15%. Because Jiangsu Hanvo Safety Product hasn't been listed for many years, the market is still learning about how the business performs. Shareholders have had an even rougher run lately, with the share price down 18% in the last 90 days. But this could be related to the weak market, which is down 15% in the same period.

If the past week is anything to go by, investor sentiment for Jiangsu Hanvo Safety Product 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 Hanvo Safety Product

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 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).

Unfortunately Jiangsu Hanvo Safety Product reported an EPS drop of 41% for the last year. Remarkably, he share price decline of 42% per year is particularly close to the EPS drop. Given the lower EPS we might have expected investors to lose confidence in the stock, but that doesn't seemed to have happened. Rather, the share price is remains a similar multiple of the EPS, suggesting the outlook remains the same.

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 doubt Jiangsu Hanvo Safety Product shareholders are happy with the loss of 42% over twelve months (even including dividends). That falls short of the market, which lost 15%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. With the stock down 18% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. It's always interesting to track share price performance over the longer term. But to understand Jiangsu Hanvo Safety Product better, we need to consider many other factors. Even so, be aware that Jiangsu Hanvo Safety Product is showing 2 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.