Zhe Jiang Hai Liang (SZSE:002203) sheds CN¥839m, 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. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Investors in Zhe Jiang Hai Liang Co., Ltd (SZSE:002203) have tasted that bitter downside in the last year, as the share price dropped 31%. That contrasts poorly with the market decline of 12%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 21% in three years.

After losing 4.9% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

View our latest analysis for Zhe Jiang Hai Liang

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 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.

Unhappily, Zhe Jiang Hai Liang had to report a 13% decline in EPS over the last year. The share price decline of 31% is actually more than the EPS drop. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock.

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 Zhe Jiang Hai Liang's key metrics by checking this interactive graph of Zhe Jiang Hai Liang's earnings, revenue and cash flow.

A Different Perspective

We regret to report that Zhe Jiang Hai Liang shareholders are down 30% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 12%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Even so, be aware that Zhe Jiang Hai Liang is showing 2 warning signs in our investment analysis , and 1 of those is a bit concerning...

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.