For many investors, the main point of stock picking is to generate higher returns than the overall market. But if you try your hand at stock picking, your risk returning less than the market. We regret to report that long term Zhejiang Guyuelongshan Shaoxing Wine Co.,Ltd (SHSE:600059) shareholders have had that experience, with the share price dropping 22% in three years, versus a market decline of about 15%.

While the stock has risen 5.0% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Although the share price is down over three years, Zhejiang Guyuelongshan Shaoxing WineLtd actually managed to grow EPS by 0.4% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

It looks to us like the market was probably too optimistic around growth three years ago. Looking to other metrics might better explain the share price change.

The modest 0.9% dividend yield is unlikely to be guiding the market view of the stock. Revenue is actually up 6.4% over the three years, so the share price drop doesn't seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching Zhejiang Guyuelongshan Shaoxing WineLtd more closely, as sometimes stocks fall unfairly. This could present an opportunity.

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

If you are thinking of buying or selling Zhejiang Guyuelongshan Shaoxing WineLtd stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

The total return of 12% received by Zhejiang Guyuelongshan Shaoxing WineLtd shareholders over the last year isn't far from the market return of -11%. Longer term investors wouldn't be so upset, since they would have made 3%, each year, over five years. If the stock price has been impacted by changing sentiment, rather than deteriorating business conditions, it could spell opportunity. 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 1 warning sign for Zhejiang Guyuelongshan Shaoxing WineLtd you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.