It's easy to match the overall market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by CSSC Science& Technology Co., Ltd (SHSE:600072) shareholders over the last year, as the share price declined 41%. That contrasts poorly with the market decline of 11%. On the bright side, the stock is actually up 29% in the last three years. The falls have accelerated recently, with the share price down 14% in the last three months.
If the past week is anything to go by, investor sentiment for CSSC Science& Technology isn't positive, so let's see if there's a mismatch between fundamentals and the share price.
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).
Unfortunately CSSC Science& Technology reported an EPS drop of 56% for the last year. This fall in the EPS is significantly worse than the 41% the share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have expected earnings to drop faster. Indeed, with a P/E ratio of 221.01 there is obviously some real optimism that earnings will bounce back.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
This free interactive report on CSSC 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 11% in the twelve months, CSSC Science& Technology shareholders did even worse, losing 41% (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. Longer term investors wouldn't be so upset, since they would have made 6%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand CSSC Science& Technology better, we need to consider many other factors. For instance, we've identified 4 warning signs for CSSC Science& Technology (3 can't be ignored) that you should be aware of.
If you are like me, then you will not want to miss this free list of undervalued small caps 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.