If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But the long term shareholders of Changjiang Runfa Health Industry Co., Ltd. (SZSE:002435) have had an unfortunate run in the last three years. So they might be feeling emotional about the 70% share price collapse, in that time. 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 21% 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.

Since Changjiang Runfa Health Industry has shed CN¥494m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

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. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Over the three years that the share price declined, Changjiang Runfa Health Industry's earnings per share (EPS) dropped significantly, falling to a loss. Due to the loss, it's not easy to use EPS as a reliable guide to the business. But it's safe to say we'd generally expect the share price to be lower as a result!

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 Changjiang Runfa Health Industry's key metrics by checking this interactive graph of Changjiang Runfa Health Industry's earnings, revenue and cash flow.

A Different Perspective

We regret to report that Changjiang Runfa Health Industry shareholders are down 49% for the year. Unfortunately, that's worse than the broader market decline of 8.9%. 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 9% 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. 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 Changjiang Runfa Health Industry you should know about.

Of course Changjiang Runfa Health Industry 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.