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 Sangfor Technologies Inc. (SZSE:300454) have had an unfortunate run in the last three years. Sadly for them, the share price is down 69% in that time. And more recent buyers are having a tough time too, with a drop of 21% in the last year. The falls have accelerated recently, with the share price down 25% in the last three months.

After losing 12% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the three years that the share price fell, Sangfor Technologies' earnings per share (EPS) dropped by 36% each year. This change in EPS is reasonably close to the 32% average annual decrease in the share price. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. In this case, it seems that the EPS is guiding the share price.

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

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

Sangfor Technologies shareholders are down 21% for the year (even including dividends), but the market itself is up 6.1%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. 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. To that end, you should be aware of the 2 warning signs we've spotted with Sangfor Technologies .

Of course Sangfor Technologies 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.