In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Truking Technology Limited (SZSE:300358) shareholders have had that experience, with the share price dropping 51% in three years, versus a market decline of about 19%. And over the last year the share price fell 49%, so we doubt many shareholders are delighted. Unfortunately the share price momentum is still quite negative, with prices down 17% in thirty days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

After losing 8.6% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

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).

Truking Technology saw its EPS decline at a compound rate of 24% per year, over the last three years. This change in EPS is reasonably close to the 21% average annual decrease in the share price. That suggests that the market sentiment around the company hasn't changed much over that time, despite the disappointment. It seems like the share price is reflecting the declining earnings per share.

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 Truking Technology's key metrics by checking this interactive graph of Truking Technology's earnings, revenue and cash flow.

A Different Perspective

While the broader market lost about 13% in the twelve months, Truking Technology shareholders did even worse, losing 49% (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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.0% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Truking Technology better, we need to consider many other factors. To that end, you should be aware of the 4 warning signs we've spotted with Truking Technology .

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 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.