The one-year earnings decline is not helping Shanghai Feilo AcousticsLtd's (SHSE:600651 share price, as stock falls another 6.6% in past week

The simplest way to benefit from a rising market is to buy an index fund. But if you buy individual stocks, you can do both better or worse than that. That downside risk was realized by Shanghai Feilo Acoustics Co.,Ltd (SHSE:600651) shareholders over the last year, as the share price declined 33%. That falls noticeably short of the market decline of around 19%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 17% in three years. Shareholders have had an even rougher run lately, with the share price down 12% in the last 90 days. Of course, this share price action may well have been influenced by the 7.4% decline in the broader market, throughout the period.

With the stock having lost 6.6% 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 Feilo AcousticsLtd

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, Shanghai Feilo AcousticsLtd had to report a 81% decline in EPS over the last year. The share price fall of 33% isn't as bad as the reduction in earnings per share. 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 98.56, 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 Shanghai Feilo AcousticsLtd's earnings, revenue and cash flow.

A Different Perspective

We regret to report that Shanghai Feilo AcousticsLtd shareholders are down 33% for the year. Unfortunately, that's worse than the broader market decline of 19%. 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 5% 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. Take risks, for example - Shanghai Feilo AcousticsLtd has 2 warning signs we think you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com