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. Investors in Shenzhen Gongjin Electronics Co., Ltd. (SHSE:603118) have tasted that bitter downside in the last year, as the share price dropped 40%. That's well below the market decline of 14%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 18% in three years. Furthermore, it's down 25% in about a quarter. That's not much fun for holders.

On a more encouraging note the company has added CN¥388m to its market cap in just the last 7 days, so let's see if we can determine what's driven the one-year loss for shareholders.

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...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the last year Shenzhen Gongjin Electronics saw its earnings per share drop below zero. Some investors no doubt dumped the stock as a result. Of course, if the company can turn the situation around, investors will likely profit.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

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

A Different Perspective

While the broader market lost about 14% in the twelve months, Shenzhen Gongjin Electronics shareholders did even worse, losing 39% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 3% 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 Shenzhen Gongjin Electronics better, we need to consider many other factors. Take risks, for example - Shenzhen Gongjin Electronics has 2 warning signs we think you should be aware of.

Of course Shenzhen Gongjin Electronics may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com