In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But even the best stock picker will only win with some selections. So we wouldn't blame long term China Resources and Environment Co.,Ltd. (SHSE:600217) shareholders for doubting their decision to hold, with the stock down 23% over a half decade.

If the past week is anything to go by, investor sentiment for China Resources and EnvironmentLtd isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Looking back five years, both China Resources and EnvironmentLtd's share price and EPS declined; the latter at a rate of 29% per year. The share price decline of 5% 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 92.39 suggests that shareholders believe earnings will grow in the years ahead.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

This free interactive report on China Resources and EnvironmentLtd's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Although it hurts that China Resources and EnvironmentLtd returned a loss of 10% in the last twelve months, the broader market was actually worse, returning a loss of 17%. Given the total loss of 4% per year over five years, it seems returns have deteriorated in the last twelve months. Whilst Baron Rothschild does tell the investor "buy when there's blood in the streets, even if the blood is your own", buyers would need to examine the data carefully to be comfortable that the business itself is sound. It's always interesting to track share price performance over the longer term. But to understand China Resources and EnvironmentLtd better, we need to consider many other factors. Case in point: We've spotted 4 warning signs for China Resources and EnvironmentLtd you should be aware of, and 2 of them are potentially serious.

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.