The five-year shareholder returns and company earnings persist lower as Guangdong Rifeng Electric Cable (SZSE:002953) stock falls a further 10% in past week

Ideally, your overall portfolio should beat the market average. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in Guangdong Rifeng Electric Cable Co., Ltd. (SZSE:002953), since the last five years saw the share price fall 34%. Unfortunately the share price momentum is still quite negative, with prices down 10% in thirty days. We do note, however, that the broader market is down 5.8% in that period, and this may have weighed on the share price.

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

View our latest analysis for Guangdong Rifeng Electric Cable

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. 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 five years over which the share price declined, Guangdong Rifeng Electric Cable's earnings per share (EPS) dropped by 3.1% each year. This reduction in EPS is less than the 8% annual reduction in the share price. So it seems the market was too confident about the business, in the past.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

Although it hurts that Guangdong Rifeng Electric Cable returned a loss of 7.7% in the last twelve months, the broader market was actually worse, returning a loss of 12%. Unfortunately, last year's performance may indicate unresolved challenges, given that it's worse than the annualised loss of 6% over the last half decade. While some investors do well specializing in buying companies that are struggling (but nonetheless undervalued), don't forget that Buffett said that 'turnarounds seldom turn'. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should be aware of the 1 warning sign we've spotted with Guangdong Rifeng Electric Cable .

Of course Guangdong Rifeng Electric Cable may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.