In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But even the best stock picker will only win with some selections. So we wouldn't blame long term Hengtong Optic-Electric Co., Ltd. (SHSE:600487) shareholders for doubting their decision to hold, with the stock down 39% over a half decade. And it's not just long term holders hurting, because the stock is down 28% in the last year. The falls have accelerated recently, with the share price down 16% in the last three months. But this could be related to the weak market, which is down 9.2% in the same period.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

Check out our latest analysis for Hengtong Optic-Electric

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

Looking back five years, both Hengtong Optic-Electric's share price and EPS declined; the latter at a rate of 9.6% per year. This change in EPS is remarkably close to the 9% average annual decrease in the share price. This suggests that market participants have not changed their view of the company all that much. Rather, the share price change has reflected changes in earnings per share.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Hengtong Optic-Electric has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Hengtong Optic-Electric will grow revenue in the future.

A Different Perspective

While the broader market lost about 21% in the twelve months, Hengtong Optic-Electric shareholders did even worse, losing 27% (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 7% 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. It's always interesting to track share price performance over the longer term. But to understand Hengtong Optic-Electric better, we need to consider many other factors. For example, we've discovered 1 warning sign for Hengtong Optic-Electric that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.