Taking the occasional loss comes part and parcel with investing on the stock market. Anyone who held Ningbo Lehui International Engineering Equipment Co.,Ltd (SHSE:603076) over the last year knows what a loser feels like. The share price is down a hefty 56% in that time. To make matters worse, the returns over three years have also been really disappointing (the share price is 53% lower than three years ago). Even worse, it's down 19% in about a month, which isn't fun at all.

With the stock having lost 17% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

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. 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.

Unhappily, Ningbo Lehui International Engineering EquipmentLtd had to report a 78% decline in EPS over the last year. Readers should not this outcome was influenced by the impact of extraordinary items on EPS. The share price fall of 56% isn't as bad as the reduction in earnings per share. It may have been that the weak EPS was not as bad as some had feared. Indeed, with a P/E ratio of 365.77 there is obviously some real optimism that earnings will bounce back.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

While the broader market lost about 20% in the twelve months, Ningbo Lehui International Engineering EquipmentLtd shareholders did even worse, losing 56% (even including dividends). 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 1.6% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Ningbo Lehui International Engineering EquipmentLtd has 3 warning signs (and 1 which can't be ignored) we think you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.