The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Unfortunately the Kaishan Group Co., Ltd. (SZSE:300257) share price slid 28% over twelve months. That's well below the market decline of 12%. However, the longer term returns haven't been so bad, with the stock down 14% in the last three years. Shareholders have had an even rougher run lately, with the share price down 17% in the last 90 days.

With the stock having lost 5.6% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

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.

During the unfortunate twelve months during which the Kaishan Group share price fell, it actually saw its earnings per share (EPS) improve by 5.2%. It could be that the share price was previously over-hyped.

It's fair to say that the share price does not seem to be reflecting the EPS growth. So it's easy to justify a look at some other metrics.

With a low yield of 0.8% we doubt that the dividend influences the share price much. Kaishan Group managed to grow revenue over the last year, which is usually a real positive. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

This free interactive report on Kaishan Group's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

We regret to report that Kaishan Group shareholders are down 27% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 12%. 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 0.8% over the last half decade. 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. It's always interesting to track share price performance over the longer term. But to understand Kaishan Group better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Kaishan Group you should be aware of, and 1 of them is concerning.

But note: Kaishan Group may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.