While it may not be enough for some shareholders, we think it is good to see the China Testing & Certification International Group Co.,Ltd. (SHSE:603060) share price up 17% in a single quarter. But that cannot eclipse the less-than-impressive returns over the last three years. Truth be told the share price declined 38% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

Since China Testing & Certification International GroupLtd has shed CN¥402m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

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).

China Testing & Certification International GroupLtd saw its EPS decline at a compound rate of 0.1% per year, over the last three years. The share price decline of 15% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

This free interactive report on China Testing & Certification International GroupLtd's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market lost about 11% in the twelve months, China Testing & Certification International GroupLtd shareholders did even worse, losing 30% (even including dividends). 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. On the bright side, long term shareholders have made money, with a gain of 1.7% 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with China Testing & Certification International GroupLtd (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.

Of course China Testing & Certification International GroupLtd 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.

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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.