Further weakness as Nantong Acetic Acid Chemical (SHSE:603968) drops 13% this week, taking three-year losses to 36%

As an investor its worth striving to ensure your overall portfolio beats the market average. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that's been the case for longer term Nantong Acetic Acid Chemical Co., Ltd. (SHSE:603968) shareholders, since the share price is down 42% in the last three years, falling well short of the market decline of around 13%. And the ride hasn't got any smoother in recent times over the last year, with the price 31% lower in that time. On top of that, the share price is down 13% in the last week.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

View our latest analysis for Nantong Acetic Acid Chemical

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).

Nantong Acetic Acid Chemical saw its share price decline over the three years in which its EPS also dropped, falling to a loss. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. However, we can say we'd expect to see a falling share price in this scenario.

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 Nantong Acetic Acid Chemical's earnings, revenue and cash flow.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Nantong Acetic Acid Chemical, it has a TSR of -36% for the last 3 years. 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

Investors in Nantong Acetic Acid Chemical had a tough year, with a total loss of 29% (including dividends), against a market gain of about 14%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Nantong Acetic Acid Chemical is showing 2 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

We will like Nantong Acetic Acid Chemical better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider 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.