The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. That downside risk was realized by MeiG Smart Technology Co., Ltd (SZSE:002881) shareholders over the last year, as the share price declined 46%. That's disappointing when you consider the market declined 12%. However, the longer term returns haven't been so bad, with the stock down 27% in the last three years. Shareholders have had an even rougher run lately, with the share price down 23% in the last 90 days.

Since MeiG Smart Technology has shed CN¥555m 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. 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).

Unhappily, MeiG Smart Technology had to report a 62% decline in EPS over the last year. The share price fall of 46% isn't as bad as the reduction in earnings per share. So the market may not be too worried about the EPS figure, at the moment -- or it may have expected earnings to drop faster. With a P/E ratio of 95.16, it's fair to say the market sees an EPS rebound on the cards.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Dive deeper into MeiG Smart Technology's key metrics by checking this interactive graph of MeiG Smart Technology's earnings, revenue and cash flow.

A Different Perspective

We regret to report that MeiG Smart Technology shareholders are down 46% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 12%. 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. Longer term investors wouldn't be so upset, since they would have made 5%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand MeiG Smart Technology better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for MeiG Smart Technology you should know about.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.