We think intelligent long term investing is the way to go. But no-one is immune from buying too high. For example, after five long years the Anhui Korrun Co., Ltd. (SZSE:300577) share price is a whole 58% lower. That's an unpleasant experience for long term holders. Furthermore, it's down 15% in about a quarter. That's not much fun for holders. However, one could argue that the price has been influenced by the general market, which is down 9.2% in the same timeframe.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

See our latest analysis for Anhui Korrun

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 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 five years over which the share price declined, Anhui Korrun's earnings per share (EPS) dropped by 12% each year. This reduction in EPS is less than the 16% annual reduction in the share price. This implies that the market was previously too optimistic about the stock.

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

It might be well worthwhile taking a look at our free report on Anhui Korrun's earnings, revenue and cash flow.

A Different Perspective

While it's never nice to take a loss, Anhui Korrun shareholders can take comfort that , including dividends,their trailing twelve month loss of 18% wasn't as bad as the market loss of around 21%. Given the total loss of 9% per year over five years, it seems returns have deteriorated in the last twelve months. While some investors do well specializing in buying companies that are struggling (but nonetheless undervalued), don't forget that Buffett said that 'turnarounds seldom turn'. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Anhui Korrun you should know about.

Of course Anhui Korrun 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.