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. One such example is Jiangsu Zhongshe Group Co., Ltd. (SZSE:002883), which saw its share price fall 29% over a year, against a market decline of 28%. However, the longer term returns haven't been so bad, with the stock down 8.2% in the last three years. Unfortunately the last month hasn't been any better, with the share price down 31%. But this could be related to poor market conditions -- stocks are down 15% in the same time.

Since Jiangsu Zhongshe Group has shed CN¥456m 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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Unhappily, Jiangsu Zhongshe Group had to report a 22% decline in EPS over the last year. This reduction in EPS is not as bad as the 29% share price fall. So it seems the market was too confident about the business, a year ago.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It might be well worthwhile taking a look at our free report on Jiangsu Zhongshe Group's earnings, revenue and cash flow.

A Different Perspective

Jiangsu Zhongshe Group shareholders are down 28% over twelve months (even including dividends), which isn't far from the market return of -28%. Unfortunately, last year's performance is a deterioration of an already poor long term track record, given the loss of 5% per year over the last five years. Weak performance over the long term usually destroys market confidence in a stock, but bargain hunters may want to take a closer look for signs 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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Jiangsu Zhongshe Group (of which 1 is significant!) you should know about.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.