Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. For example, the Daheng New Epoch Technology Inc. (SHSE:600288) share price is down 36% in the last year. That's well below the market decline of 13%. At least the damage isn't so bad if you look at the last three years, since the stock is down 22% in that time. Shareholders have had an even rougher run lately, with the share price down 22% in the last 90 days.

After losing 9.7% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.

Daheng New Epoch Technology managed to increase earnings per share from a loss to a profit, over the last 12 months.

Earnings per share growth rates aren't particularly useful for comparing with the share price, when a company has moved from loss to profit. So it makes sense to check out some other factors.

With a low yield of 0.09% we doubt that the dividend influences the share price much. In contrast, the 11% drop in revenue is a real concern. If the market sees the weak revenue as jeopardising EPS, that could explain the lower share price.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

While the broader market lost about 13% in the twelve months, Daheng New Epoch Technology shareholders did even worse, losing 36% (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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4% per year over five years. 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. It's always interesting to track share price performance over the longer term. But to understand Daheng New Epoch Technology better, we need to consider many other factors. For example, we've discovered 2 warning signs for Daheng New Epoch Technology 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.