Hengdian EntertainmentLTD (SHSE:603103 investor one-year losses grow to 16% as the stock sheds CN¥577m this past week

Investors can earn very close to the average market return by buying an index fund. In contrast individual stocks will provide a wide range of possible returns, and may fall short. For example, the Hengdian Entertainment Co.,LTD (SHSE:603103) share price fell 16% in the last year, slightly below the market decline of around 14%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 3.2% in three years. Furthermore, it's down 15% in about a quarter. That's not much fun for holders.

With the stock having lost 6.1% 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 Hengdian EntertainmentLTD

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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the last year Hengdian EntertainmentLTD grew its earnings per share, moving from a loss to a profit.

Earnings per share growth rates aren't particularly useful for comparing with the share price, when a company has moved from loss to profit. But we may find different metrics more enlightening.

Hengdian EntertainmentLTD's revenue is actually up 64% over the last year. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

It is of course excellent to see how Hengdian EntertainmentLTD has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Hengdian EntertainmentLTD stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While the broader market lost about 14% in the twelve months, Hengdian EntertainmentLTD shareholders did even worse, losing 16%. 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 2% 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. It's always interesting to track share price performance over the longer term. But to understand Hengdian EntertainmentLTD better, we need to consider many other factors. For instance, we've identified 1 warning sign for Hengdian EntertainmentLTD that you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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