No-one enjoys it when they lose money on a stock. But it can difficult to make money in a declining market. While the Founder Securities Co., Ltd. (SHSE:601901) share price is down 18% in the last three years, the total return to shareholders (which includes dividends) was -18%. That's better than the market which declined 31% over the last three years. Furthermore, it's down 17% 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 12% in the same timeframe.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

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.

During the unfortunate three years of share price decline, Founder Securities actually saw its earnings per share (EPS) improve by 6.6% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.

Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

With a rather small yield of just 0.3% we doubt that the stock's share price is based on its dividend. We think that the revenue decline over three years, at a rate of 6.6% per year, probably had some shareholders looking to sell. After all, if revenue keeps shrinking, it may be difficult to find earnings growth in the future.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

If you are thinking of buying or selling Founder Securities stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While it's never nice to take a loss, Founder Securities shareholders can take comfort that , including dividends,their trailing twelve month loss of 8.1% wasn't as bad as the market loss of around 16%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 0.4% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. It's always interesting to track share price performance over the longer term. But to understand Founder Securities better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Founder Securities , and understanding them should be part of your investment process.

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.