The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. One great example is Guangxi Huaxi Nonferrous Metal Co.,Ltd (SHSE:600301) which saw its share price drive 155% higher over five years. On the other hand, the stock price has retraced 7.6% in the last week. But this could be related to the soft market, with stocks selling off around 2.9% in the last week.

While the stock has fallen 7.6% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 five years of share price growth, Guangxi Huaxi Nonferrous MetalLtd achieved compound earnings per share (EPS) growth of 20% per year. This EPS growth is remarkably close to the 21% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. Indeed, it would appear the share price is reacting to the EPS.

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

We know that Guangxi Huaxi Nonferrous MetalLtd has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Guangxi Huaxi Nonferrous MetalLtd's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Although it hurts that Guangxi Huaxi Nonferrous MetalLtd returned a loss of 1.2% in the last twelve months, the broader market was actually worse, returning a loss of 19%. Longer term investors wouldn't be so upset, since they would have made 21%, each year, over five years. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Guangxi Huaxi Nonferrous MetalLtd , and understanding them should be part of your investment process.

Of course Guangxi Huaxi Nonferrous MetalLtd 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.

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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.

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