Many investors define successful investing as beating the market average over the long term. But if you try your hand at stock picking, your risk returning less than the market. We regret to report that long term Qinghai Huzhu TianYouDe Highland Barley Spirit Co., Ltd. (SZSE:002646) shareholders have had that experience, with the share price dropping 32% in three years, versus a market decline of about 16%. The more recent news is of little comfort, with the share price down 27% in a year. Shareholders have had an even rougher run lately, with the share price down 19% in the last 90 days.

Since Qinghai Huzhu TianYouDe Highland Barley Spirit has shed CN¥434m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Qinghai Huzhu TianYouDe Highland Barley Spirit became profitable within the last five years. We would usually expect to see the share price rise as a result. So given the share price is down it's worth checking some other metrics too.

The modest 0.6% dividend yield is unlikely to be guiding the market view of the stock. Revenue is actually up 5.1% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating Qinghai Huzhu TianYouDe Highland Barley Spirit further; while we may be missing something on this analysis, there might also be an opportunity.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

We know that Qinghai Huzhu TianYouDe Highland Barley Spirit has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Qinghai Huzhu TianYouDe Highland Barley Spirit's financial health with this free report on its balance sheet.

A Different Perspective

We regret to report that Qinghai Huzhu TianYouDe Highland Barley Spirit shareholders are down 27% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 16%. 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 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. Case in point: We've spotted 1 warning sign for Qinghai Huzhu TianYouDe Highland Barley Spirit you should be aware of.

Of course Qinghai Huzhu TianYouDe Highland Barley Spirit 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.