If you love investing in stocks you're bound to buy some losers. Long term Shanghai Wanye Enterprises Co.,Ltd (SHSE:600641) shareholders know that all too well, since the share price is down considerably over three years. So they might be feeling emotional about the 52% share price collapse, in that time. And the ride hasn't got any smoother in recent times over the last year, with the price 37% lower in that time. Even worse, it's down 18% in about a month, which isn't fun at all.

On a more encouraging note the company has added CN¥527m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Shanghai Wanye EnterprisesLtd saw its EPS decline at a compound rate of 45% per year, over the last three years. This fall in the EPS is worse than the 22% compound annual share price fall. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term. This positive sentiment is also reflected in the generous P/E ratio of 137.37.

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

This free interactive report on Shanghai Wanye EnterprisesLtd's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market lost about 15% in the twelve months, Shanghai Wanye EnterprisesLtd shareholders did even worse, losing 37% (even including dividends). 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. 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Shanghai Wanye EnterprisesLtd you should know about.

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