The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the long term shareholders of Rongsheng Petrochemical Co., Ltd. (SZSE:002493) have had an unfortunate run in the last three years. Unfortunately, they have held through a 66% decline in the share price in that time. On the other hand the share price has bounced 6.8% over the last week.

While the stock has risen 6.8% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Over the three years that the share price declined, Rongsheng Petrochemical's earnings per share (EPS) dropped significantly, falling to a loss. Due to the loss, it's not easy to use EPS as a reliable guide to the business. However, we can say we'd expect to see a falling share price in this scenario.

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

This free interactive report on Rongsheng Petrochemical's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

While it's certainly disappointing to see that Rongsheng Petrochemical shares lost 19% throughout the year, that wasn't as bad as the market loss of 23%. Longer term investors wouldn't be so upset, since they would have made 8%, each year, over five years. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. 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 instance, we've identified 2 warning signs for Rongsheng Petrochemical that you should be aware of.

We will like Rongsheng Petrochemical better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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.