You can invest in an index fund if you want to make sure your returns approximately match the overall market. By comparison, an individual stock is unlikely to match market returns - and could well fall short. For example, that's what happened with GF Securities Co., Ltd. (SZSE:000776) over the last year - it's share price is down 22% versus a market decline of 20%. At least the damage isn't so bad if you look at the last three years, since the stock is down 15% in that time.

Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

See our latest analysis for GF Securities

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. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the unfortunate twelve months during which the GF Securities share price fell, it actually saw its earnings per share (EPS) improve by 8.5%. It could be that the share price was previously over-hyped.

It's surprising to see the share price fall so much, despite the improved EPS. So it's well worth checking out some other metrics, too.

Revenue was fairly steady year on year, which isn't usually such a bad thing. But the share price might be lower because the market expected a meaningful improvement, and got none.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

GF Securities is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for GF Securities in this interactive graph of future profit estimates.

A Different Perspective

The total return of 20% received by GF Securities shareholders over the last year isn't far from the market return of -20%. Longer term investors wouldn't be so upset, since they would have made 5%, each year, over five years. If the stock price has been impacted by changing sentiment, rather than deteriorating business conditions, it could spell opportunity. It's always interesting to track share price performance over the longer term. But to understand GF Securities better, we need to consider many other factors. Even so, be aware that GF Securities is showing 2 warning signs in our investment analysis , you should know about...

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.

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.