The one-year shareholder returns and company earnings persist lower as Shandong Hongyu Precision Machinery (SZSE:002890) stock falls a further 11% in past week

The simplest way to benefit from a rising market is to buy an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in Shandong Hongyu Precision Machinery Co., Ltd. (SZSE:002890) have tasted that bitter downside in the last year, as the share price dropped 20%. That contrasts poorly with the market decline of 9.6%. Taking the longer term view, the stock fell 19% over the last three years. More recently, the share price has dropped a further 16% in a month.

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

Check out our latest analysis for Shandong Hongyu Precision Machinery

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Unhappily, Shandong Hongyu Precision Machinery had to report a 8.7% decline in EPS over the last year. This reduction in EPS is not as bad as the 20% 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 62.69, 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).

It might be well worthwhile taking a look at our free report on Shandong Hongyu Precision Machinery's earnings, revenue and cash flow.

A Different Perspective

We regret to report that Shandong Hongyu Precision Machinery shareholders are down 19% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 9.6%. 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. On the bright side, long term shareholders have made money, with a gain of 1.5% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Take risks, for example - Shandong Hongyu Precision Machinery has 2 warning signs we think you should be aware of.

We will like Shandong Hongyu Precision Machinery better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.