Many investors define successful investing as beating the market average over the long term. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Longhua Technology Group Co.,Ltd. (SZSE:300263) shareholders have had that experience, with the share price dropping 29% in three years, versus a market decline of about 19%. On top of that, the share price is down 14% in the last week. However, this move may have been influenced by the broader market, which fell 7.1% in that time.

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

There is no denying that markets are sometimes efficient, but prices do not always reflect 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.

During the three years that the share price fell, Longhua Technology GroupLtd's earnings per share (EPS) dropped by 26% each year. In comparison the 11% compound annual share price decline isn't as bad as the EPS drop-off. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in. This positive sentiment is also reflected in the generous P/E ratio of 57.20.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Longhua Technology GroupLtd has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Longhua Technology GroupLtd will grow revenue in the future.

A Different Perspective

Investors in Longhua Technology GroupLtd had a tough year, with a total loss of 1.1% (including dividends), against a market gain of about 6.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Before forming an opinion on Longhua Technology GroupLtd 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.