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, the China Meheco Group Co., Ltd. (SHSE:600056) share price fell 32% in the last year, slightly below the market decline of around 26%. On the bright side, the stock is actually up 12% in the last three years. Furthermore, it's down 14% in about a quarter. That's not much fun for holders. But this could be related to the weak market, which is down 19% in the same period.

Since China Meheco Group has shed CN¥1.6b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Unfortunately China Meheco Group reported an EPS drop of 2.6% for the last year. The share price decline of 32% is actually more than the EPS drop. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of China Meheco Group's earnings, revenue and cash flow.

A Different Perspective

While the broader market lost about 26% in the twelve months, China Meheco Group shareholders did even worse, losing 31% (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. On the bright side, long term shareholders have made money, with a gain of 5% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth 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. To that end, you should learn about the 2 warning signs we've spotted with China Meheco Group (including 1 which doesn't sit too well with us) .

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.