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. For example, the Shenzhen Forms Syntron Information Co., Ltd. (SZSE:300468) share price is down 28% in the last year. That's well below the market decline of 15%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 21% in three years. The falls have accelerated recently, with the share price down 16% in the last three months.
With the stock having lost 8.8% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Unfortunately Shenzhen Forms Syntron Information reported an EPS drop of 30% for the last year. Remarkably, he share price decline of 28% per year is particularly close to the EPS drop. So it seems that the market sentiment has not changed much, despite the weak results. Rather, the share price is remains a similar multiple of the EPS, suggesting the outlook remains the same.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Shenzhen Forms Syntron Information's key metrics by checking this interactive graph of Shenzhen Forms Syntron Information's earnings, revenue and cash flow.
A Different Perspective
We regret to report that Shenzhen Forms Syntron Information shareholders are down 28% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 15%. 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. Longer term investors wouldn't be so upset, since they would have made 2%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. For example, we've discovered 4 warning signs for Shenzhen Forms Syntron Information (1 is a bit concerning!) that you should be aware of before investing here.
We will like Shenzhen Forms Syntron Information 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 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.