Zhejiang Xinhua ChemicalLtd (SHSE:603867) sheds CN¥523m, company earnings and investor returns have been trending downwards for past year

The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. For example, the Zhejiang Xinhua Chemical Co.,Ltd (SHSE:603867) share price is down 45% in the last year. That's disappointing when you consider the market declined 14%. On the bright side, the stock is actually up 13% in the last three years. Furthermore, it's down 17% in about a quarter. That's not much fun for holders.

After losing 11% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

See our latest analysis for Zhejiang Xinhua ChemicalLtd

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

Unfortunately Zhejiang Xinhua ChemicalLtd reported an EPS drop of 19% for the last year. This reduction in EPS is not as bad as the 45% share price fall. This suggests the EPS fall has made some shareholders more nervous about the business.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Dive deeper into Zhejiang Xinhua ChemicalLtd's key metrics by checking this interactive graph of Zhejiang Xinhua ChemicalLtd's earnings, revenue and cash flow.

A Different Perspective

While the broader market lost about 14% in the twelve months, Zhejiang Xinhua ChemicalLtd 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. Longer term investors wouldn't be so upset, since they would have made 2%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Zhejiang Xinhua ChemicalLtd better, we need to consider many other factors. Take risks, for example - Zhejiang Xinhua ChemicalLtd has 1 warning sign we think you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.

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