It's easy to match the overall market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in Innovation New Material Technology Co., Ltd. (SHSE:600361) have tasted that bitter downside in the last year, as the share price dropped 26%. That contrasts poorly with the market decline of 14%. On the other hand, the stock is actually up 2.2% over three years. Shareholders have had an even rougher run lately, with the share price down 12% in the last 90 days.

If the past week is anything to go by, investor sentiment for Innovation New Material Technology isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

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).

Even though the Innovation New Material Technology share price is down over the year, its EPS actually improved. It could be that the share price was previously over-hyped.

By glancing at these numbers, we'd posit that the the market had expectations of much higher growth, last year. But other metrics might shed some light on why the share price is down.

With a low yield of 1.9% we doubt that the dividend influences the share price much. Innovation New Material Technology's revenue is actually up 6.0% over the last year. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.

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

If you are thinking of buying or selling Innovation New Material Technology stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

We regret to report that Innovation New Material Technology shareholders are down 26% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 14%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 0.9% over the last half decade. 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 Innovation New Material Technology better, we need to consider many other factors. Case in point: We've spotted 4 warning signs for Innovation New Material Technology you should be aware of, and 2 of them can't be ignored.

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.

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