In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But even the best stock picker will only win with some selections. So we wouldn't blame long term Shanghai New Huang Pu Industrial Group Co., Ltd. (SHSE:600638) shareholders for doubting their decision to hold, with the stock down 38% over a half decade. The falls have accelerated recently, with the share price down 14% in the last three months. But this could be related to the weak market, which is down 6.1% in the same period.

If the past week is anything to go by, investor sentiment for Shanghai New Huang Pu Industrial Group isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for Shanghai New Huang Pu Industrial Group

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 New Huang Pu Industrial Group became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics might give us a better handle on how its value is changing over time.

We don't think that the 0.5% is big factor in the share price, since it's quite small, as dividends go. In contrast to the share price, revenue has actually increased by 38% a year in the five year period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Shanghai New Huang Pu Industrial Group the TSR over the last 5 years was -34%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

While the broader market lost about 6.6% in the twelve months, Shanghai New Huang Pu Industrial Group shareholders did even worse, losing 8.3% (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 6% 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. It's always interesting to track share price performance over the longer term. But to understand Shanghai New Huang Pu Industrial Group better, we need to consider many other factors. Even so, be aware that Shanghai New Huang Pu Industrial Group is showing 3 warning signs in our investment analysis , and 1 of those can't be ignored...

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.