If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But the long term shareholders of Yueyang Forest & Paper Co., Ltd. (SHSE:600963) have had an unfortunate run in the last three years. Regrettably, they have had to cope with a 70% drop in the share price over that period. The more recent news is of little comfort, with the share price down 54% in a year. The falls have accelerated recently, with the share price down 27% in the last three months.

After losing 6.3% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Over the three years that the share price declined, Yueyang Forest & Paper's earnings per share (EPS) dropped significantly, falling to a loss. Extraordinary items contributed to this situation. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. But it's safe to say we'd generally expect the share price to be lower as a result!

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

This free interactive report on Yueyang Forest & Paper's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

We regret to report that Yueyang Forest & Paper shareholders are down 54% for the year. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.1% per year over five years. 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. It's always interesting to track share price performance over the longer term. But to understand Yueyang Forest & Paper better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Yueyang Forest & Paper you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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