In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that's been the case for longer term Han's Laser Technology Industry Group Co., Ltd. (SZSE:002008) shareholders, since the share price is down 36% in the last three years, falling well short of the market decline of around 9.7%. The falls have accelerated recently, with the share price down 11% in the last three months. Of course, this share price action may well have been influenced by the 6.3% decline in the broader market, throughout the period.

With the stock having lost 5.2% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

View our latest analysis for Han's Laser Technology Industry Group

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.

Although the share price is down over three years, Han's Laser Technology Industry Group actually managed to grow EPS by 4.2% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.

It's pretty reasonable to suspect the market was previously to bullish on the stock, and has since moderated expectations. Looking to other metrics might better explain the share price change.

With a rather small yield of just 0.9% we doubt that the stock's share price is based on its dividend. Revenue is actually up 9.1% 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 Han's Laser Technology Industry Group 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).

Han's Laser Technology Industry Group is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling Han's Laser Technology Industry Group stock, you should check out this free report showing analyst consensus estimates for future profits.

A Different Perspective

While the broader market lost about 3.4% in the twelve months, Han's Laser Technology Industry Group shareholders did even worse, losing 20% (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 5% over the last half decade. 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. Take risks, for example - Han's Laser Technology Industry Group has 2 warning signs we think you should be aware of.

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.