The three-year earnings decline is not helping Wolong Resources Group's (SHSE:600173 share price, as stock falls another 10% in past week

As an investor its worth striving to ensure your overall portfolio beats the market average. But if you try your hand at stock picking, you risk returning less than the market. We regret to report that long term Wolong Resources Group Co., Ltd. (SHSE:600173) shareholders have had that experience, with the share price dropping 36% in three years, versus a market decline of about 21%. The more recent news is of little comfort, with the share price down 23% in a year. And the share price decline continued over the last week, dropping some 10%.

After losing 10% 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 Wolong Resources Group

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.

During the three years that the share price fell, Wolong Resources Group's earnings per share (EPS) dropped by 34% each year. This fall in the EPS is worse than the 14% compound annual share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in.

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

It might be well worthwhile taking a look at our free report on Wolong Resources Group's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Wolong Resources Group's TSR for the last 3 years was -32%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

We regret to report that Wolong Resources Group shareholders are down 22% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 11%. 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 1.3%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. For instance, we've identified 4 warning signs for Wolong Resources Group (2 are a bit unpleasant) that you should be aware of.

We will like Wolong Resources Group 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.