Generally speaking long term investing is the way to go. But no-one is immune from buying too high. For example the Hubei Fuxing Science and Technology Co.,Ltd (SZSE:000926) share price dropped 58% over five years. We certainly feel for shareholders who bought near the top. And some of the more recent buyers are probably worried, too, with the stock falling 42% in the last year. And the share price decline continued over the last week, dropping some 15%.

If the past week is anything to go by, investor sentiment for Hubei Fuxing Science and TechnologyLtd isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).

During the five years over which the share price declined, Hubei Fuxing Science and TechnologyLtd's earnings per share (EPS) dropped by 43% each year. This fall in the EPS is worse than the 16% compound annual share price fall. So investors might expect EPS to bounce back -- or they may have previously foreseen the EPS decline.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

This free interactive report on Hubei Fuxing Science and TechnologyLtd'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 19% in the twelve months, Hubei Fuxing Science and TechnologyLtd shareholders did even worse, losing 42% (even including dividends). 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 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 Hubei Fuxing Science and TechnologyLtd better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Hubei Fuxing Science and TechnologyLtd (at least 2 which make us uncomfortable) , and understanding them should be part of your investment process.

Of course Hubei Fuxing Science and TechnologyLtd 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