In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But even the best stock picker will only win with some selections. So we wouldn't blame long term Shanghai Stonehill Technology Co., Ltd. (SZSE:002195) shareholders for doubting their decision to hold, with the stock down 37% over a half decade. And it's not just long term holders hurting, because the stock is down 20% in the last year. The falls have accelerated recently, with the share price down 18% in the last three months.

With the stock having lost 4.0% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Shanghai Stonehill Technology became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics may better explain the share price move.

We don't think that the 0.4% is big factor in the share price, since it's quite small, as dividends go. It could be that the revenue decline of 44% per year is viewed as evidence that Shanghai Stonehill Technology is shrinking. This has probably encouraged some shareholders to sell down the stock.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

This free interactive report on Shanghai Stonehill Technology's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

We regret to report that Shanghai Stonehill Technology shareholders are down 20% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 17%. 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 6% 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. 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. Take risks, for example - Shanghai Stonehill Technology has 1 warning sign we think you should be aware of.

Of course Shanghai Stonehill Technology 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