In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Zhejiang Longsheng Group Co.,Ltd (SHSE:600352) shareholders have had that experience, with the share price dropping 47% in three years, versus a market decline of about 27%. And over the last year the share price fell 23%, so we doubt many shareholders are delighted. Shareholders have had an even rougher run lately, with the share price down 13% in the last 90 days. However, one could argue that the price has been influenced by the general market, which is down 9.2% in the same timeframe.

Since Zhejiang Longsheng GroupLtd has shed CN¥947m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Zhejiang Longsheng GroupLtd

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

During the three years that the share price fell, Zhejiang Longsheng GroupLtd's earnings per share (EPS) dropped by 20% each year. This change in EPS is reasonably close to the 19% average annual decrease in the share price. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. 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).

Dive deeper into Zhejiang Longsheng GroupLtd's key metrics by checking this interactive graph of Zhejiang Longsheng GroupLtd's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Zhejiang Longsheng GroupLtd the TSR over the last 3 years was -43%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Zhejiang Longsheng GroupLtd shareholders are down 21% over twelve months (even including dividends), which isn't far from the market return of -21%. So last year was actually even worse than the last five years, which cost shareholders 2% per year. Weak performance over the long term usually destroys market confidence in a stock, but bargain hunters may want to take a closer look for signs of a turnaround. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 1 warning sign for Zhejiang Longsheng GroupLtd that you should be aware of.

We will like Zhejiang Longsheng GroupLtd better if we see some big insider buys. While we wait, check out this free list of growing companies 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.