Shanghai Lonyer Data (SHSE:603003) investors are sitting on a loss of 46% if they invested a year ago

It's easy to match the overall 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. Investors in Shanghai Lonyer Data Co., Ltd. (SHSE:603003) have tasted that bitter downside in the last year, as the share price dropped 46%. That falls noticeably short of the market decline of around 18%. At least the damage isn't so bad if you look at the last three years, since the stock is down 26% in that time. The falls have accelerated recently, with the share price down 25% in the last three months. But this could be related to the weak market, which is down 12% in the same period.

Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

See our latest analysis for Shanghai Lonyer Data

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Even though the Shanghai Lonyer Data share price is down over the year, its EPS actually improved. It could be that the share price was previously over-hyped.

The divergence between the EPS and the share price is quite notable, during the year. But we might find some different metrics explain the share price movements better.

With a low yield of 1.2% we doubt that the dividend influences the share price much. On the other hand, we're certainly perturbed by the 81% decline in Shanghai Lonyer Data's revenue. Many investors see falling revenue as a likely precursor to lower earnings, so this could well explain the weak share price.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

This free interactive report on Shanghai Lonyer Data's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market lost about 18% in the twelve months, Shanghai Lonyer Data shareholders did even worse, losing 46% (even including dividends). 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 7% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Shanghai Lonyer Data you should know about.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.