Jiuzhitang (SZSE:000989) sheds CN¥556m, company earnings and investor returns have been trending downwards for past year

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in Jiuzhitang Co., Ltd. (SZSE:000989) have tasted that bitter downside in the last year, as the share price dropped 37%. That's disappointing when you consider the market declined 8.7%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 15% in three years. Shareholders have had an even rougher run lately, with the share price down 13% in the last 90 days. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.

After losing 7.8% 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 Jiuzhitang

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Unhappily, Jiuzhitang had to report a 17% decline in EPS over the last year. The share price decline of 37% is actually more than the EPS drop. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock.

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

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

A Different Perspective

While the broader market lost about 8.7% in the twelve months, Jiuzhitang shareholders did even worse, losing 36% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 0.4% per year over half a decade. 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. 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. Take risks, for example - Jiuzhitang has 1 warning sign we think you should be aware of.

We will like Jiuzhitang 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.