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. For example, the China Energy Engineering Corporation Limited (HKG:3996) share price is down 31% in the last year. That's well below the market decline of 20%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 8.0% in three years. Shareholders have had an even rougher run lately, with the share price down 19% in the last 90 days.

While the last year has been tough for China Energy Engineering shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

View our latest analysis for China Energy Engineering

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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, China Energy Engineering had to report a 3.1% decline in EPS over the last year. The share price decline of 31% is actually more than the EPS drop. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock. The less favorable sentiment is reflected in its current P/E ratio of 3.95.

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 China Energy Engineering's key metrics by checking this interactive graph of China Energy Engineering's earnings, revenue and cash flow.

A Different Perspective

We regret to report that China Energy Engineering shareholders are down 29% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 20%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 3% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Take risks, for example - China Energy Engineering has 2 warning signs (and 1 which is significant) we think you should know about.

We will like China Energy Engineering better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong 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.