Fuda Alloy MaterialsLtd (SHSE:603045) sheds CN¥169m, company earnings and investor returns have been trending downwards for past five years

For many, the main point of investing is to generate higher returns than the overall market. But every investor is virtually certain to have both over-performing and under-performing stocks. So we wouldn't blame long term Fuda Alloy Materials Co.,Ltd (SHSE:603045) shareholders for doubting their decision to hold, with the stock down 48% over a half decade. We also note that the stock has performed poorly over the last year, with the share price down 33%. More recently, the share price has dropped a further 16% in a month.

With the stock having lost 11% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for Fuda Alloy MaterialsLtd

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Looking back five years, both Fuda Alloy MaterialsLtd's share price and EPS declined; the latter at a rate of 10% per year. This change in EPS is reasonably close to the 12% average annual decrease in the share price. This implies that the market has had a fairly steady view of the stock. Rather, the share price change has reflected changes in earnings per share.

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

Dive deeper into Fuda Alloy MaterialsLtd's key metrics by checking this interactive graph of Fuda Alloy MaterialsLtd's earnings, revenue and cash flow.

A Different Perspective

While the broader market lost about 9.6% in the twelve months, Fuda Alloy MaterialsLtd shareholders did even worse, losing 32% (even including dividends). 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Fuda Alloy MaterialsLtd you should know about.

But note: Fuda Alloy MaterialsLtd may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.