In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in Union Optech Co.,Ltd. (SZSE:300691), since the last five years saw the share price fall 15%. In the last ninety days we've seen the share price slide 17%.

With the stock having lost 9.6% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).

Looking back five years, both Union OptechLtd's share price and EPS declined; the latter at a rate of 11% per year. The share price decline of 3% per year isn't as bad as the EPS decline. So the market may previously have expected a drop, or else it expects the situation will improve. The high P/E ratio of 71.39 suggests that shareholders believe earnings will grow in the years ahead.

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

Dive deeper into Union OptechLtd's key metrics by checking this interactive graph of Union OptechLtd's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Union OptechLtd's TSR for the last 5 years was -11%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

The total return of 12% received by Union OptechLtd shareholders over the last year isn't far from the market return of -12%. So last year was actually even worse than the last five years, which cost shareholders 2% per year. 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. It's always interesting to track share price performance over the longer term. But to understand Union OptechLtd better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Union OptechLtd (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.