If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But the long term shareholders of Zhou Hei Ya International Holdings Company Limited (HKG:1458) have had an unfortunate run in the last three years. So they might be feeling emotional about the 71% share price collapse, in that time. The more recent news is of little comfort, with the share price down 56% in a year. The falls have accelerated recently, with the share price down 18% in the last three months.

With the stock having lost 8.4% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

See our latest analysis for Zhou Hei Ya International Holdings

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 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, Zhou Hei Ya International Holdings' earnings per share (EPS) dropped by 8.4% each year. The share price decline of 34% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past.

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

It might be well worthwhile taking a look at our free report on Zhou Hei Ya International Holdings' 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). 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. We note that for Zhou Hei Ya International Holdings the TSR over the last 3 years was -68%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We regret to report that Zhou Hei Ya International Holdings shareholders are down 54% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 2.6%. 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. 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 example, we've discovered 2 warning signs for Zhou Hei Ya International Holdings (1 is concerning!) that you should be aware of before investing here.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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.