It's easy to match the overall market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Investors in Harbin Electric Company Limited (HKG:1133) have tasted that bitter downside in the last year, as the share price dropped 35%. That's disappointing when you consider the market declined 3.0%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 10% in three years. Furthermore, it's down 22% in about a quarter. That's not much fun for holders.

After losing 10% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

See our latest analysis for Harbin Electric

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the last year Harbin Electric grew its earnings per share, moving from a loss to a profit.

We're surprised that the share price is lower given that improvement. If the company can sustain the earnings growth, this might be an inflection point for the business, which would make right now a really interesting time to study it more closely.

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

We know that Harbin Electric has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Harbin Electric will grow revenue in the future.

A Different Perspective

While the broader market lost about 3.0% in the twelve months, Harbin Electric shareholders did even worse, losing 35% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% 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. 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Harbin Electric you should know about.

Of course Harbin Electric 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.