Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. Investors in Huizhou China Eagle Electronic Technology Inc. (SZSE:002579) have tasted that bitter downside in the last year, as the share price dropped 33%. That falls noticeably short of the market decline of around 7.9%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 21% in three years. More recently, the share price has dropped a further 17% in a month.

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

See our latest analysis for Huizhou China Eagle Electronic Technology

Because Huizhou China Eagle Electronic Technology made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In just one year Huizhou China Eagle Electronic Technology saw its revenue fall by 14%. That's not what investors generally want to see. Shareholders have seen the share price drop 33% in that time. What would you expect when revenue is falling, and it doesn't make a profit? It's hard to escape the conclusion that buyers must envision either growth down the track, cost cutting, or both.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

We regret to report that Huizhou China Eagle Electronic Technology shareholders are down 32% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 7.9%. 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 4%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. For example, we've discovered 3 warning signs for Huizhou China Eagle Electronic Technology that you should be aware of before investing here.

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.