The simplest way to benefit from a rising market is to buy an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by Shandong Xinchao Energy Corporation Limited (SHSE:600777) shareholders over the last year, as the share price declined 29%. That's well below the market decline of 17%. The silver lining (for longer term investors) is that the stock is still 18% higher than it was three years ago.

On a more encouraging note the company has added CN¥408m 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 paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Unhappily, Shandong Xinchao Energy had to report a 20% decline in EPS over the last year. This reduction in EPS is not as bad as the 29% share price fall. So it seems the market was too confident about the business, a year ago. The P/E ratio of 4.78 also points to the negative market sentiment.

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 Shandong Xinchao Energy's key metrics by checking this interactive graph of Shandong Xinchao Energy's earnings, revenue and cash flow.

A Different Perspective

We regret to report that Shandong Xinchao Energy shareholders are down 29% for the year. Unfortunately, that's worse than the broader market decline of 17%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 2% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. You could get a better understanding of Shandong Xinchao Energy's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

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.