These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But in any given year a good portion of stocks will fall short of that. For example, the Ruitai Materials Technology Co., Ltd. (SZSE:002066) share price fell 31% in the last year, slightly below the market decline of around 26%. On the bright side, the stock is actually up 8.4% in the last three years. Unfortunately the share price momentum is still quite negative, with prices down 23% in thirty days. We do note, however, that the broader market is down 15% in that period, and this may have weighed on the share price.

With the stock having lost 21% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

During the unfortunate twelve months during which the Ruitai Materials Technology share price fell, it actually saw its earnings per share (EPS) improve by 16%. It could be that the share price was previously over-hyped.

It's surprising to see the share price fall so much, despite the improved EPS. So it's easy to justify a look at some other metrics.

With a low yield of 0.9% we doubt that the dividend influences the share price much. In contrast, the 4.0% drop in revenue is a real concern. If the market sees the weak revenue as jeopardising EPS, that could explain the lower share price.

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

We know that Ruitai Materials Technology has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Ruitai Materials Technology stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

We regret to report that Ruitai Materials Technology shareholders are down 31% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 26%. 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. On the bright side, long term shareholders have made money, with a gain of 3% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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 instance, we've identified 2 warning signs for Ruitai Materials Technology (1 is significant) that you should be aware of.

But note: Ruitai Materials Technology may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.