You can invest in an index fund if you want to make sure your returns approximately match the overall market. But in any given year a good portion of stocks will fall short of that. The Shanghai Construction Group Co., Ltd. (SHSE:600170) is such an example; over three years its share price is down 12% versus a marketdecline of 12%.

Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.

View our latest analysis for Shanghai Construction Group

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 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.

During the unfortunate three years of share price decline, Shanghai Construction Group actually saw its earnings per share (EPS) improve by 2.0% per year. 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). Or else the company was over-hyped in the past, and so its growth has disappointed.

Given that EPS is up and the share price is down, it seems clear the market is less excited about the business than it was. Having said that, if the EPS gains continue we'd expect the share price to improve, longer term.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that Shanghai Construction Group has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Shanghai Construction Group will grow revenue in the future.

A Different Perspective

It's nice to see that Shanghai Construction Group shareholders have received a total shareholder return of 4.7% over the last year. Of course, that includes the dividend. There's no doubt those recent returns are much better than the TSR loss of 2% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. 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 1 warning sign for Shanghai Construction Group that you should be aware of.

But note: Shanghai Construction Group may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.