Investors can approximate the average market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by Ocean's King Lighting Science & Technology Co., Ltd (SZSE:002724) shareholders over the last year, as the share price declined 49%. That falls noticeably short of the market decline of around 28%. At least the damage isn't so bad if you look at the last three years, since the stock is down 18% in that time. Furthermore, it's down 39% in about a quarter. That's not much fun for holders. However, one could argue that the price has been influenced by the general market, which is down 21% in the same timeframe.

After losing 25% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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, Ocean's King Lighting Science & Technology had to report a 47% decline in EPS over the last year. Remarkably, he share price decline of 49% per year is particularly close to the EPS drop. Therefore one could posit that the market has not become more concerned about the company, despite the lower EPS. Rather, the share price has approximately tracked EPS growth.

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

This free interactive report on Ocean's King Lighting Science & Technology's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market lost about 28% in the twelve months, Ocean's King Lighting Science & Technology shareholders did even worse, losing 49% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 0.6% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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 - Ocean's King Lighting Science & Technology has 3 warning signs we think 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.