The simplest way to benefit from a rising market is to buy an index fund. But if you buy individual stocks, you can do both better or worse than that. Investors in Lier Chemical Co.,LTD. (SZSE:002258) have tasted that bitter downside in the last year, as the share price dropped 38%. That falls noticeably short of the market decline of around 5.8%. 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. But this could be related to the weak market, which is down 8.2% in the same period.

After losing 6.3% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

Check out our latest analysis for Lier ChemicalLTD

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Unhappily, Lier ChemicalLTD had to report a 27% decline in EPS over the last year. The share price decline of 38% is actually more than the EPS drop. This suggests the EPS fall has made some shareholders are more nervous about the business. The less favorable sentiment is reflected in its current P/E ratio of 7.74.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It is of course excellent to see how Lier ChemicalLTD has grown profits over the years, but the future is more important for shareholders. This free interactive report on Lier ChemicalLTD's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Lier ChemicalLTD, it has a TSR of -36% for the last 1 year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

While the broader market lost about 5.8% in the twelve months, Lier ChemicalLTD shareholders did even worse, losing 36% (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. Longer term investors wouldn't be so upset, since they would have made 0.2%, 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. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Lier ChemicalLTD (of which 1 makes us a bit uncomfortable!) you should know about.

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.