For many investors, the main point of stock picking is to generate higher returns than the overall market. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Guangdong Piano Customized Furniture Co., Ltd. (SZSE:002853) shareholders have had that experience, with the share price dropping 43% in three years, versus a market decline of about 12%. The more recent news is of little comfort, with the share price down 36% in a year. Shareholders have had an even rougher run lately, with the share price down 24% in the last 90 days.

Since Guangdong Piano Customized Furniture has shed CN¥390m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Guangdong Piano Customized Furniture

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Guangdong Piano Customized Furniture became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. So given the share price is down it's worth checking some other metrics too.

Arguably the revenue decline of 5.2% per year has people thinking Guangdong Piano Customized Furniture is shrinking. After all, if revenue keeps shrinking, it may be difficult to find earnings growth in the future.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

This free interactive report on Guangdong Piano Customized Furniture's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

We regret to report that Guangdong Piano Customized Furniture shareholders are down 36% for the year. Unfortunately, that's worse than the broader market decline of 8.4%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5% 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. It's always interesting to track share price performance over the longer term. But to understand Guangdong Piano Customized Furniture better, we need to consider many other factors. Even so, be aware that Guangdong Piano Customized Furniture is showing 1 warning sign in our investment analysis , you should know about...

But note: Guangdong Piano Customized Furniture 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.