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. Investors in Hainan Jingliang Holdings Co., Ltd. (SZSE:000505) have tasted that bitter downside in the last year, as the share price dropped 25%. That's well below the market decline of 10%. Zooming out, the stock is down 24% in the last three years. Even worse, it's down 15% in about a month, which isn't fun at all.

After losing 9.5% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

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 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.

Unhappily, Hainan Jingliang Holdings had to report a 37% decline in EPS over the last year. This fall in the EPS is significantly worse than the 25% the share price fall. It may have been that the weak EPS was not as bad as some had feared. Indeed, with a P/E ratio of 46.34 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 10% in the twelve months, Hainan Jingliang Holdings shareholders did even worse, losing 25% (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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Hainan Jingliang Holdings better, we need to consider many other factors. For instance, we've identified 4 warning signs for Hainan Jingliang Holdings (1 is a bit unpleasant) that you should be aware of.

Of course Hainan Jingliang Holdings 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.