Shanghai Flyco Electrical Appliance (SHSE:603868) investors are sitting on a loss of 20% if they invested a year ago

Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Investors in Shanghai Flyco Electrical Appliance Co., Ltd. (SHSE:603868) have tasted that bitter downside in the last year, as the share price dropped 23%. That's disappointing when you consider the market returned 24%. Taking the longer term view, the stock fell 20% over the last three years. Furthermore, it's down 12% in about a quarter. That's not much fun for holders.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

View our latest analysis for Shanghai Flyco Electrical Appliance

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Unfortunately Shanghai Flyco Electrical Appliance reported an EPS drop of 28% for the last year. This proportional reduction in earnings per share isn't far from the 23% decrease in the share price. So it seems that the market sentiment has not changed much, despite the weak results. Rather, the share price is remains a similar multiple of the EPS, suggesting the outlook remains the same.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

This free interactive report on Shanghai Flyco Electrical Appliance's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Shanghai Flyco Electrical Appliance, it has a TSR of -20% for the last 1 year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Shanghai Flyco Electrical Appliance shareholders are down 20% for the year (even including dividends), but the market itself is up 24%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 2% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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 Shanghai Flyco Electrical Appliance you should be aware of, and 1 of them doesn't sit too well with us.

Of course Shanghai Flyco Electrical Appliance 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.

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.