The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. That downside risk was realized by Yantai Zhenghai Biotechnology Co., Ltd. (SZSE:300653) shareholders over the last year, as the share price declined 41%. That contrasts poorly with the market decline of 13%. However, the longer term returns haven't been so bad, with the stock down 24% in the last three years. The falls have accelerated recently, with the share price down 14% in the last three months. But this could be related to the weak market, which is down 7.7% in the same period.

With the stock having lost 9.1% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for Yantai Zhenghai Biotechnology

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).

Even though the Yantai Zhenghai Biotechnology share price is down over the year, its EPS actually improved. It's quite possible that growth expectations may have been unreasonable in the past.

The divergence between the EPS and the share price is quite notable, during the year. So it's easy to justify a look at some other metrics.

On the other hand, we're certainly perturbed by the 6.1% decline in Yantai Zhenghai Biotechnology's revenue. Many investors see falling revenue as a likely precursor to lower earnings, so this could well explain the weak share price.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We know that Yantai Zhenghai Biotechnology has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling Yantai Zhenghai Biotechnology stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

We regret to report that Yantai Zhenghai Biotechnology shareholders are down 40% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 13%. 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. Longer term investors wouldn't be so upset, since they would have made 7%, 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. Case in point: We've spotted 1 warning sign for Yantai Zhenghai Biotechnology you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.