This week we saw the Shanghai Fengyuzhu Culture Technology Co., Ltd. (SHSE:603466) share price climb by 10%. But that doesn't change the reality of under-performance over the last twelve months. In fact, the price has declined 37% in a year, falling short of the returns you could get by investing in an index fund.

On a more encouraging note the company has added CN¥404m to its market cap in just the last 7 days, so let's see if we can determine what's driven the one-year loss for shareholders.

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).

Unhappily, Shanghai Fengyuzhu Culture Technology had to report a 87% decline in EPS over the last year. The share price fall of 37% isn't as bad as the reduction in earnings per share. So the market may not be too worried about the EPS figure, at the moment -- or it may have expected earnings to drop faster. Indeed, with a P/E ratio of 127.72 there is obviously some real optimism that earnings will bounce back.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

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

A Different Perspective

We regret to report that Shanghai Fengyuzhu Culture Technology shareholders are down 36% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 14%. 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 1.6% 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 Shanghai Fengyuzhu Culture Technology 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 Shanghai Fengyuzhu Culture Technology (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.

Of course Shanghai Fengyuzhu Culture Technology 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.