Shanghai Jahwa United (SHSE:600315) sheds CN¥371m, company earnings and investor returns have been trending downwards for past three years

If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But the long term shareholders of Shanghai Jahwa United Co., Ltd. (SHSE:600315) have had an unfortunate run in the last three years. Sadly for them, the share price is down 67% in that time. And over the last year the share price fell 45%, so we doubt many shareholders are delighted. Furthermore, it's down 25% in about a quarter. That's not much fun for holders. But this could be related to the weak market, which is down 12% in the same period.

With the stock having lost 3.7% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

View our latest analysis for Shanghai Jahwa United

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

During the three years that the share price fell, Shanghai Jahwa United's earnings per share (EPS) dropped by 6.5% each year. This reduction in EPS is slower than the 31% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.

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

Dive deeper into Shanghai Jahwa United's key metrics by checking this interactive graph of Shanghai Jahwa United's earnings, revenue and cash flow.

A Different Perspective

While the broader market lost about 19% in the twelve months, Shanghai Jahwa United shareholders did even worse, losing 44% (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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 9% over the last half decade. 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. For instance, we've identified 1 warning sign for Shanghai Jahwa United that you should be aware of.

For those who like to find winning investments this free list of undervalued 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.