As every investor would know, not every swing hits the sweet spot. But you have a problem if you face massive losses more than once in a while. So consider, for a moment, the misfortune of Shandong Weigao Group Medical Polymer Company Limited (HKG:1066) investors who have held the stock for three years as it declined a whopping 75%. That would certainly shake our confidence in the decision to own the stock. And the ride hasn't got any smoother in recent times over the last year, with the price 61% lower in that time. Shareholders have had an even rougher run lately, with the share price down 16% in the last 90 days.

While the stock has risen 3.4% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

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.

Shandong Weigao Group Medical Polymer saw its EPS decline at a compound rate of 2.0% per year, over the last three years. This reduction in EPS is slower than the 37% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy. The less favorable sentiment is reflected in its current P/E ratio of 8.49.

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

This free interactive report on Shandong Weigao Group Medical Polymer's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Investors in Shandong Weigao Group Medical Polymer had a tough year, with a total loss of 60% (including dividends), against a market gain of about 6.0%. 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 7% 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. 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. For example, we've discovered 1 warning sign for Shandong Weigao Group Medical Polymer that you should be aware of before investing here.

Of course Shandong Weigao Group Medical Polymer 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 Hong Kong 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com