Investors can earn very close to the average market return by buying an index fund. By comparison, an individual stock is unlikely to match market returns - and could well fall short. For example, the China National Chemical Engineering Co., Ltd (SHSE:601117) share price fell 32% in the last year, slightly below the market decline of around 26%. Longer term investors have fared much better, since the share price is up 4.0% in three years. The falls have accelerated recently, with the share price down 15% in the last three months. But this could be related to the weak market, which is down 19% in the same period.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

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 National Chemical Engineering reported an EPS drop of 0.2% for the last year. This reduction in EPS is not as bad as the 32% share price fall. So it seems the market was too confident about the business, a year ago. The P/E ratio of 6.66 also points to the negative market sentiment.

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

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized 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 China National Chemical Engineering's earnings, revenue and cash flow.

A Different Perspective

We regret to report that China National Chemical Engineering shareholders are down 31% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 26%. 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. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand China National Chemical Engineering better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with China National Chemical Engineering , and understanding them should be part of your investment process.

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.