As an investor its worth striving to ensure your overall portfolio beats the market average. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term HUAXI Securities Co., Ltd. (SZSE:002926) shareholders, since the share price is down 34% in the last three years, falling well short of the market decline of around 11%. The falls have accelerated recently, with the share price down 19% in the last three months. However, one could argue that the price has been influenced by the general market, which is down 9.2% in the same timeframe.

If the past week is anything to go by, investor sentiment for HUAXI Securities isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for HUAXI Securities

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. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the three years that the share price fell, HUAXI Securities' earnings per share (EPS) dropped by 38% each year. In comparison the 13% compound annual share price decline isn't as bad as the EPS drop-off. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term. With a P/E ratio of 47.57, it's fair to say the market sees a brighter future for the business.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

This free interactive report on HUAXI Securities' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's nice to see that HUAXI Securities shareholders have received a total shareholder return of 1.1% over the last year. Of course, that includes the dividend. There's no doubt those recent returns are much better than the TSR loss of 1.3% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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. Case in point: We've spotted 2 warning signs for HUAXI Securities you should be aware of, and 1 of them is concerning.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.