It can certainly be frustrating when a stock does not perform as hoped. But no-one can make money on every call, especially in a declining market. The Inner Mongolia Baotou Steel Union Co., Ltd. (SHSE:600010) is down 24% over three years, but the total shareholder return is -23% once you include the dividend. That's better than the market which declined 27% over the last three years. And more recent buyers are having a tough time too, with a drop of 23% in the last year. Shareholders have had an even rougher run lately, with the share price down 15% in the last 90 days. However, one could argue that the price has been influenced by the general market, which is down 8.8% in the same timeframe.

It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Inner Mongolia Baotou Steel Union became profitable within the last five years. We would usually expect to see the share price rise as a result. So given the share price is down it's worth checking some other metrics too.

Arguably the revenue decline of 3.5% per year has people thinking Inner Mongolia Baotou Steel Union is shrinking. And that's not surprising, since it seems unlikely that EPS growth can continue for long in the absence of revenue growth.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We know that Inner Mongolia Baotou Steel Union has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling Inner Mongolia Baotou Steel Union stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

While the broader market lost about 17% in the twelve months, Inner Mongolia Baotou Steel Union shareholders did even worse, losing 23%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 2% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Even so, be aware that Inner Mongolia Baotou Steel Union is showing 1 warning sign in our investment analysis , you should know about...

Of course Inner Mongolia Baotou Steel Union 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.

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