Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by Byhealth Co., Ltd (SZSE:300146) shareholders over the last year, as the share price declined 35%. That contrasts poorly with the market decline of 18%. Looking at the longer term, the stock is down 29% over three years. The falls have accelerated recently, with the share price down 15% in the last three months. However, one could argue that the price has been influenced by the general market, which is down 7.8% in the same timeframe.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for Byhealth

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 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.

Even though the Byhealth share price is down over the year, its EPS actually improved. It could be that the share price was previously over-hyped.

The divergence between the EPS and the share price is quite notable, during the year. So it's well worth checking out some other metrics, too.

With a low yield of 1.1% we doubt that the dividend influences the share price much. Byhealth managed to grow revenue over the last year, which is usually a real positive. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We know that Byhealth has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Byhealth in this interactive graph of future profit estimates.

A Different Perspective

We regret to report that Byhealth shareholders are down 34% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 18%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 0.7% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality 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. Take risks, for example - Byhealth has 1 warning sign we think you should be aware of.

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.