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. That downside risk was realized by Jiangsu JIXIN Wind Energy Technology Co., Ltd. (SHSE:601218) shareholders over the last year, as the share price declined 28%. That's disappointing when you consider the market declined 10%. Looking at the longer term, the stock is down 23% over three years.

If the past week is anything to go by, investor sentiment for Jiangsu JIXIN Wind Energy Technology isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Unhappily, Jiangsu JIXIN Wind Energy Technology had to report a 4.8% decline in EPS over the last year. This reduction in EPS is not as bad as the 28% share price fall. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Dive deeper into Jiangsu JIXIN Wind Energy Technology's key metrics by checking this interactive graph of Jiangsu JIXIN Wind Energy Technology's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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 Jiangsu JIXIN Wind Energy Technology the TSR over the last 1 year was -25%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We regret to report that Jiangsu JIXIN Wind Energy Technology shareholders are down 25% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 10%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.2% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Jiangsu JIXIN Wind Energy Technology , and understanding them should be part of your investment process.

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.