It's not possible to invest over long periods without making some bad investments. But really big losses can really drag down an overall portfolio. So consider, for a moment, the misfortune of Shanghai Milkground Food Tech Co., Ltd (SHSE:600882) investors who have held the stock for three years as it declined a whopping 79%. That'd be enough to cause even the strongest minds some disquiet. And the ride hasn't got any smoother in recent times over the last year, with the price 33% lower in that time. Furthermore, it's down 15% in about a quarter. That's not much fun for holders. However, one could argue that the price has been influenced by the general market, which is down 13% in the same timeframe.

With the stock having lost 6.8% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

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.

Shanghai Milkground Food Tech saw its EPS decline at a compound rate of 6.8% per year, over the last three years. This reduction in EPS is slower than the 41% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy. Of course, with a P/E ratio of 78.45, the market remains optimistic.

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

Dive deeper into Shanghai Milkground Food Tech's key metrics by checking this interactive graph of Shanghai Milkground Food Tech's earnings, revenue and cash flow.

A Different Perspective

While the broader market lost about 17% in the twelve months, Shanghai Milkground Food Tech shareholders did even worse, losing 33%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% over the last half decade. 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 Shanghai Milkground Food Tech better, we need to consider many other factors. Even so, be aware that Shanghai Milkground Food Tech is showing 1 warning sign in our investment analysis , you should know about...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.