Market is not liking Longhua Technology GroupLtd's (SZSE:300263) earnings decline as stock retreats 9.4% this week

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. For example, the Longhua Technology Group Co.,Ltd. (SZSE:300263) share price is down 25% in the last year. That's well below the market decline of 13%. However, the longer term returns haven't been so bad, with the stock down 11% in the last three years. Furthermore, it's down 17% in about a quarter. That's not much fun for holders.

After losing 9.4% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

Check out our latest analysis for Longhua Technology GroupLtd

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Unhappily, Longhua Technology GroupLtd had to report a 66% decline in EPS over the last year. This fall in the EPS is significantly worse than the 25% the share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have expected earnings to drop faster. With a P/E ratio of 56.46, it's fair to say the market sees an EPS rebound on the cards.

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

It might be well worthwhile taking a look at our free report on Longhua Technology GroupLtd's earnings, revenue and cash flow.

A Different Perspective

We regret to report that Longhua Technology GroupLtd shareholders are down 25% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 13%. 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 2% 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. It's always interesting to track share price performance over the longer term. But to understand Longhua Technology GroupLtd better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Longhua Technology GroupLtd , and understanding them should be part of your investment process.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.