The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Investors in Puyang Huicheng Electronic Material Co., Ltd. (SZSE:300481) have tasted that bitter downside in the last year, as the share price dropped 50%. That's disappointing when you consider the market declined 20%. We note that it has not been easy for shareholders over three years, either; the share price is down 33% in that time. The falls have accelerated recently, with the share price down 14% in the last three months. But this could be related to the weak market, which is down 8.3% in the same period.
With the stock having lost 9.0% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
View our latest analysis for Puyang Huicheng Electronic Material
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
Unhappily, Puyang Huicheng Electronic Material had to report a 25% decline in EPS over the last year. This reduction in EPS is not as bad as the 50% share price fall. So it seems the market was too confident about the business, a year ago.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It might be well worthwhile taking a look at our free report on Puyang Huicheng Electronic Material's earnings, revenue and cash flow.
A Different Perspective
While the broader market lost about 20% in the twelve months, Puyang Huicheng Electronic Material shareholders did even worse, losing 49% (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. On the bright side, long term shareholders have made money, with a gain of 5% per year over half a decade. 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. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Puyang Huicheng Electronic Material you should know about.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.