Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Investors in Wushang Group Co., Ltd. (SZSE:000501) have tasted that bitter downside in the last year, as the share price dropped 33%. That's well below the market decline of 24%. Looking at the longer term, the stock is down 29% over three years. Shareholders have had an even rougher run lately, with the share price down 13% in the last 90 days. But this could be related to the weak market, which is down 14% in the same period.

If the past week is anything to go by, investor sentiment for Wushang Group isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

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 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.

Unhappily, Wushang Group had to report a 83% decline in EPS over the last year. This fall in the EPS is significantly worse than the 33% the share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have expected earnings to drop faster. Indeed, with a P/E ratio of 62.23 there is obviously some real optimism that earnings will bounce back.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

This free interactive report on Wushang Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

We regret to report that Wushang Group shareholders are down 32% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 24%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Wushang Group has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.