The truth is that if you invest for long enough, you're going to end up with some losing stocks. But long term Shanghai Chlor-Alkali Chemical Co., Ltd. (SHSE:600618) shareholders have had a particularly rough ride in the last three year. So they might be feeling emotional about the 59% share price collapse, in that time. Shareholders have had an even rougher run lately, with the share price down 21% in the last 90 days. But this could be related to the weak market, which is down 12% in the same period.

If the past week is anything to go by, investor sentiment for Shanghai Chlor-Alkali Chemical isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Shanghai Chlor-Alkali Chemical saw its EPS decline at a compound rate of 9.7% per year, over the last three years. This reduction in EPS is slower than the 25% annual reduction in the share price. So it seems the market was too confident about the business, in the past. This increased caution is also evident in the rather low P/E ratio, which is sitting at 10.32.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Shanghai Chlor-Alkali Chemical, it has a TSR of -55% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

While it's never nice to take a loss, Shanghai Chlor-Alkali Chemical shareholders can take comfort that , including dividends,their trailing twelve month loss of 15% wasn't as bad as the market loss of around 20%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 1.3% for each year. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Shanghai Chlor-Alkali Chemical , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.