For many, the main point of investing is to generate higher returns than the overall market. But even the best stock picker will only win with some selections. So we wouldn't blame long term Guangdong Zhongnan Iron and Steel Co., Ltd. (SZSE:000717) shareholders for doubting their decision to hold, with the stock down 55% over a half decade. More recently, the share price has dropped a further 9.1% in a month. We do note, however, that the broader market is down 7.2% in that period, and this may have weighed on the share price.

Since Guangdong Zhongnan Iron and Steel has shed CN¥412m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out our latest analysis for Guangdong Zhongnan Iron and Steel

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. 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.

In the last half decade Guangdong Zhongnan Iron and Steel saw its share price fall as its EPS declined below zero. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. But we would generally expect a lower price, given the situation.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Guangdong Zhongnan Iron and Steel the TSR over the last 5 years was -48%, 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 6.4% in the twelve months, Guangdong Zhongnan Iron and Steel shareholders did even worse, losing 9.6% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. However, the loss over the last year isn't as bad as the 8% per annum loss investors have suffered over the last half decade. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. It's always interesting to track share price performance over the longer term. But to understand Guangdong Zhongnan Iron and Steel better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Guangdong Zhongnan Iron and Steel .

Of course Guangdong Zhongnan Iron and Steel may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.