Investors can approximate the average market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Unfortunately the Shenzhen Jieshun Science and Technology Industry Co.,Ltd. (SZSE:002609) share price slid 28% over twelve months. That contrasts poorly with the market return of 7.2%. Even if shareholders bought some time ago, they wouldn't be particularly happy: the stock is down 25% in three years. More recently, the share price has dropped a further 14% in a month. We do note, however, that the broader market is down 6.1% in that period, and this may have weighed on the share price.

Since Shenzhen Jieshun Science and Technology IndustryLtd has shed CN¥768m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Unfortunately Shenzhen Jieshun Science and Technology IndustryLtd reported an EPS drop of 21% for the last year. This reduction in EPS is not as bad as the 28% share price fall. So it seems the market was too confident about the business, a year ago. Of course, with a P/E ratio of 69.03, 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 Shenzhen Jieshun Science and Technology IndustryLtd's key metrics by checking this interactive graph of Shenzhen Jieshun Science and Technology IndustryLtd's earnings, revenue and cash flow.

A Different Perspective

Investors in Shenzhen Jieshun Science and Technology IndustryLtd had a tough year, with a total loss of 27% (including dividends), against a market gain of about 7.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4% per year over five years. 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 Shenzhen Jieshun Science and Technology IndustryLtd better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Shenzhen Jieshun Science and Technology IndustryLtd you should be aware of, and 1 of them is potentially serious.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.