China National Software & Service (SHSE:600536) dips 3.5% this week as increasing losses might not be inspiring confidence among its investors

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. Investors in China National Software & Service Company Limited (SHSE:600536) have tasted that bitter downside in the last year, as the share price dropped 36%. That contrasts poorly with the market decline of 11%. However, the longer term returns haven't been so bad, with the stock down 3.3% in the last three years. Furthermore, it's down 11% in about a quarter. That's not much fun for holders.

After losing 3.5% 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 China National Software & Service

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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).

China National Software & Service fell to a loss making position during the year. While this may prove temporary, we'd consider it a negative, so it doesn't surprise us that the stock price is down. Of course, if the company can turn the situation around, investors will likely profit.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

We regret to report that China National Software & Service shareholders are down 36% for the year. Unfortunately, that's worse than the broader market decline of 11%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 1.4% per year over five years. 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. You could get a better understanding of China National Software & Service's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

We will like China National Software & Service 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.