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 Songcheng Performance Development Co.,Ltd (SZSE:300144) have had an unfortunate run in the last three years. Regrettably, they have had to cope with a 52% drop in the share price over that period. And the ride hasn't got any smoother in recent times over the last year, with the price 38% lower in that time. Shareholders have had an even rougher run lately, with the share price down 24% in the last 90 days. Of course, this share price action may well have been influenced by the 15% decline in the broader market, throughout the period.

The recent uptick of 3.2% could be a positive sign of things to come, so let's take a look at historical fundamentals.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Songcheng Performance DevelopmentLtd 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. So given the share price is down it's worth checking some other metrics too.

With a rather small yield of just 1.3% we doubt that the stock's share price is based on its dividend. We note that, in three years, revenue has actually grown at a 30% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating Songcheng Performance DevelopmentLtd further; while we may be missing something on this analysis, there might also be an opportunity.

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. If you are thinking of buying or selling Songcheng Performance DevelopmentLtd stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

We regret to report that Songcheng Performance DevelopmentLtd shareholders are down 37% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 11%. 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 8% 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. 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. Even so, be aware that Songcheng Performance DevelopmentLtd is showing 3 warning signs in our investment analysis , you should know about...

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.