If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. Long term Shandong Sinocera Functional Material Co., Ltd. (SZSE:300285) shareholders know that all too well, since the share price is down considerably over three years. So they might be feeling emotional about the 63% share price collapse, in that time. And over the last year the share price fell 44%, so we doubt many shareholders are delighted. Shareholders have had an even rougher run lately, with the share price down 19% in the last 90 days. But this could be related to the weak market, which is down 13% in the same period.

With the stock having lost 3.5% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

During the three years that the share price fell, Shandong Sinocera Functional Material's earnings per share (EPS) dropped by 6.7% each year. The share price decline of 28% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.

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

We know that Shandong Sinocera Functional Material has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

A Different Perspective

We regret to report that Shandong Sinocera Functional Material shareholders are down 43% for the year (even including dividends). 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5% per year over five years. 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. Before forming an opinion on Shandong Sinocera Functional Material you might want to consider these 3 valuation metrics.

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.