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. That downside risk was realized by Shanghai Laimu Electronics Co.,Ltd. (SHSE:603633) shareholders over the last year, as the share price declined 32%. That contrasts poorly with the market decline of 6.5%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 7.7% in three years. Furthermore, it's down 14% in about a quarter. That's not much fun for holders. But this could be related to the weak market, which is down 8.8% in the same period.
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 Shanghai Laimu ElectronicsLtd
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...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Even though the Shanghai Laimu ElectronicsLtd share price is down over the year, its EPS actually improved. It's quite possible that growth expectations may have been unreasonable in the past.
It's surprising to see the share price fall so much, despite the improved EPS. So it's easy to justify a look at some other metrics.
Given the yield is quite low, at 0.6%, we doubt the dividend can shed much light on the share price. Shanghai Laimu ElectronicsLtd managed to grow revenue over the last year, which is usually a real positive. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Take a more thorough look at Shanghai Laimu ElectronicsLtd's financial health with this free report on its balance sheet.
A Different Perspective
While the broader market lost about 6.5% in the twelve months, Shanghai Laimu ElectronicsLtd shareholders did even worse, losing 32% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 10%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. For example, we've discovered 2 warning signs for Shanghai Laimu ElectronicsLtd (1 is a bit unpleasant!) that you should be aware of before investing here.
Of course Shanghai Laimu ElectronicsLtd may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese 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.