The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the long term shareholders of Nanjing Hanrui Cobalt Co.,Ltd. (SZSE:300618) have had an unfortunate run in the last three years. Unfortunately, they have held through a 63% decline in the share price in that time. The more recent news is of little comfort, with the share price down 41% in a year. On the other hand, we note it's up 9.2% in about a month. But this could be related to good market conditions, with stocks up around 9.0% during the period.

Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.

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.

Nanjing Hanrui CobaltLtd saw its EPS decline at a compound rate of 28% per year, over the last three years. So do you think it's a coincidence that the share price has dropped 28% per year, a very similar rate to the EPS? We don't. That suggests that the market sentiment around the company hasn't changed much over that time, despite the disappointment. Rather, the share price has approximately tracked EPS growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

This free interactive report on Nanjing Hanrui CobaltLtd's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

We regret to report that Nanjing Hanrui CobaltLtd shareholders are down 40% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 11%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 9% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope 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. For example, we've discovered 3 warning signs for Nanjing Hanrui CobaltLtd (1 is a bit concerning!) that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.