Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. That downside risk was realized by Shandong Hi-Speed Road&Bridge Group Co., Ltd. (SZSE:000498) shareholders over the last year, as the share price declined 24%. That falls noticeably short of the market decline of around 15%. At least the damage isn't so bad if you look at the last three years, since the stock is down 12% in that time.

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

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 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).

Unfortunately Shandong Hi-Speed Road&Bridge Group reported an EPS drop of 13% for the last year. The share price decline of 24% is actually more than the EPS drop. This suggests the EPS fall has made some shareholders are more nervous about the business. The P/E ratio of 6.37 also points to the negative market sentiment.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

This free interactive report on Shandong Hi-Speed Road&Bridge Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

We regret to report that Shandong Hi-Speed Road&Bridge Group shareholders are down 23% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 15%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 1.4% per year over five years. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Shandong Hi-Speed Road&Bridge Group (at least 2 which don't sit too well with us) , and understanding them should be part of your investment process.

But note: Shandong Hi-Speed Road&Bridge Group 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.