It's easy to match the overall market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. For example, the Shenzhen New Nanshan Holding (Group) Co., Ltd. (SZSE:002314) share price is down 49% in the last year. That contrasts poorly with the market decline of 19%. Notably, shareholders had a tough run over the longer term, too, with a drop of 38% in the last three years. Shareholders have had an even rougher run lately, with the share price down 16% in the last 90 days. However, one could argue that the price has been influenced by the general market, which is down 7.4% in the same timeframe.

Since Shenzhen New Nanshan Holding (Group) has shed CN¥379m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

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 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 last year Shenzhen New Nanshan Holding (Group) saw its earnings per share drop below zero. Buyers no doubt think it's a temporary situation, but those with a nose for quality have low tolerance for losses. However, there may be an opportunity for investors if the company can recover.

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

Dive deeper into Shenzhen New Nanshan Holding (Group)'s key metrics by checking this interactive graph of Shenzhen New Nanshan Holding (Group)'s earnings, revenue and cash flow.

A Different Perspective

While the broader market lost about 19% in the twelve months, Shenzhen New Nanshan Holding (Group) shareholders did even worse, losing 49%. 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 6% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. To that end, you should be aware of the 1 warning sign we've spotted with Shenzhen New Nanshan Holding (Group) .

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.

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