It's easy to match the overall market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Unfortunately the EC Healthcare (HKG:2138) share price slid 47% over twelve months. That falls noticeably short of the market return of around 7.4%. To make matters worse, the returns over three years have also been really disappointing (the share price is 43% lower than three years ago). Unfortunately the share price momentum is still quite negative, with prices down 33% in thirty days.

Since EC Healthcare has shed HK$450m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out our latest analysis for EC Healthcare

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.

Unhappily, EC Healthcare had to report a 66% decline in EPS over the last year. The share price fall of 47% isn't as bad as the reduction in earnings per share. It may have been that the weak EPS was not as bad as some had feared. Indeed, with a P/E ratio of 45.09 there is obviously some real optimism that earnings will bounce back.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of EC Healthcare's earnings, revenue and cash flow.

A Different Perspective

EC Healthcare shareholders are down 46% for the year (even including dividends), but the market itself is up 7.4%. 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 5% over the last half decade. 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. 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. Even so, be aware that EC Healthcare is showing 3 warning signs in our investment analysis , you should know about...

Of course EC Healthcare 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.