Investors three-year losses continue as Wuhan Zhongyuan Huadian Science & TechnologyLtd (SZSE:300018) dips a further 12% this week, earnings continue to decline

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. By comparison, an individual stock is unlikely to match market returns - and could well fall short. The Wuhan Zhongyuan Huadian Science & Technology Co.,Ltd. (SZSE:300018) is such an example; over three years its share price is down 20% versus a marketdecline of 19%. Even worse, it's down 15% in about a month, which isn't fun at all. We do note, however, that the broader market is down 7.7% in that period, and this may have weighed on the share price.

Since Wuhan Zhongyuan Huadian Science & TechnologyLtd has shed CN¥414m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Wuhan Zhongyuan Huadian Science & TechnologyLtd

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 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).

During the three years that the share price fell, Wuhan Zhongyuan Huadian Science & TechnologyLtd's earnings per share (EPS) dropped by 7.0% each year. The 7% average annual share price decline is remarkably close to the EPS decline. That suggests that the market sentiment around the company hasn't changed much over that time, despite the disappointment. In this case, it seems that the EPS is guiding the share price.

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 Wuhan Zhongyuan Huadian Science & TechnologyLtd's earnings, revenue and cash flow.

A Different Perspective

Wuhan Zhongyuan Huadian Science & TechnologyLtd provided a TSR of 2.5% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 3% a year, over half a decade) look better. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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. Even so, be aware that Wuhan Zhongyuan Huadian Science & TechnologyLtd is showing 1 warning sign in our investment analysis , you should know about...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.