As an investor, mistakes are inevitable. But you want to avoid the really big losses like the plague. So spare a thought for the long term shareholders of Sangfor Technologies Inc. (SZSE:300454); the share price is down a whopping 79% in the last three years. That would be a disturbing experience. And the ride hasn't got any smoother in recent times over the last year, with the price 50% lower in that time. But it's up 7.3% in the last week. But this could be related to the strong market, with stocks up around 5.4% in the same time.

While the stock has risen 7.3% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 three years that the share price fell, Sangfor Technologies' earnings per share (EPS) dropped by 42% each year. So do you think it's a coincidence that the share price has dropped 41% per year, a very similar rate to the EPS? We don't. So it seems like sentiment towards the stock hasn't changed all that much over time. Rather, the share price has approximately tracked EPS growth.

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on Sangfor Technologies' earnings, revenue and cash flow.

A Different Perspective

While the broader market lost about 14% in the twelve months, Sangfor Technologies shareholders did even worse, losing 50% (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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 10% 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 Sangfor Technologies better, we need to consider many other factors. For instance, we've identified 2 warning signs for Sangfor Technologies that you should be aware of.

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.