It's easy to match the overall market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by Shenzhen Zhenye (Group) Co.,Ltd. (SZSE:000006) shareholders over the last year, as the share price declined 26%. That falls noticeably short of the market decline of around 20%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 15% in three years. But it's up 7.9% in the last week.

The recent uptick of 7.9% could be a positive sign of things to come, so let's take a look at historical fundamentals.

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

Shenzhen Zhenye (Group)Ltd fell to a loss making position during the year. Buyers no doubt think it's a temporary situation, but those with a nose for quality have low tolerance for losses. Of course, if the company can turn the situation around, investors will likely profit.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

While the broader market lost about 20% in the twelve months, Shenzhen Zhenye (Group)Ltd shareholders did even worse, losing 26%. 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 3% per year over five years. 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 Shenzhen Zhenye (Group)Ltd better, we need to consider many other factors. Take risks, for example - Shenzhen Zhenye (Group)Ltd has 2 warning signs we think you should be aware of.

We will like Shenzhen Zhenye (Group)Ltd better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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