The one-year underlying earnings growth at Shenzhen Agricultural Power GroupLtd (SZSE:000061) is promising, but the shareholders are still in the red over that time

Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Unfortunately the Shenzhen Agricultural Power Group Co.,Ltd (SZSE:000061) share price slid 27% over twelve months. That's well below the market decline of 16%. At least the damage isn't so bad if you look at the last three years, since the stock is down 11% in that time. The falls have accelerated recently, with the share price down 13% in the last three months. However, one could argue that the price has been influenced by the general market, which is down 13% in the same timeframe.

If the past week is anything to go by, investor sentiment for Shenzhen Agricultural Power GroupLtd isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for Shenzhen Agricultural Power GroupLtd

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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).

Even though the Shenzhen Agricultural Power GroupLtd share price is down over the year, its EPS actually improved. It's quite possible that growth expectations may have been unreasonable in the past.

It's fair to say that the share price does not seem to be reflecting the EPS growth. So it's easy to justify a look at some other metrics.

Shenzhen Agricultural Power GroupLtd managed to grow revenue over the last year, which is usually a real positive. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

If you are thinking of buying or selling Shenzhen Agricultural Power GroupLtd stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

We regret to report that Shenzhen Agricultural Power GroupLtd shareholders are down 25% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 16%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 0.5% 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. Case in point: We've spotted 2 warning signs for Shenzhen Agricultural Power GroupLtd you should be aware of, and 1 of them is a bit unpleasant.

Of course Shenzhen Agricultural Power GroupLtd 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.