Investors can earn very close to the average market return by buying an index fund. But in any given year a good portion of stocks will fall short of that. For example, that's what happened with Western Region Gold Co., Ltd. (SHSE:601069) over the last year - it's share price is down 25% versus a market decline of 25%. However, the longer term returns haven't been so bad, with the stock down 20% in the last three years. Furthermore, it's down 20% in about a quarter. That's not much fun for holders. But this could be related to the weak market, which is down 15% in the same period.

Since Western Region Gold has shed CN¥748m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Unfortunately Western Region Gold reported an EPS drop of 86% for the last year. This fall in the EPS is significantly worse than the 25% the share price fall. It may have been that the weak EPS was not as bad as some had feared. With a P/E ratio of 202.16, it's fair to say the market sees an EPS rebound on the cards.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on Western Region Gold's earnings, revenue and cash flow.

A Different Perspective

Western Region Gold shareholders are down 25% over twelve months (even including dividends), which isn't far from the market return of -25%. Unfortunately, last year's performance is a deterioration of an already poor long term track record, given the loss of 4% per year over the last five years. It will probably take a substantial improvement in the fundamental performance for the company to reverse this trend. 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. Case in point: We've spotted 2 warning signs for Western Region Gold you should be aware of.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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.