The one-year loss for CETC Digital TechnologyLtd (SHSE:600850) shareholders likely driven by its shrinking earnings

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. That downside risk was realized by CETC Digital Technology Co.,Ltd. (SHSE:600850) shareholders over the last year, as the share price declined 24%. That falls noticeably short of the market decline of around 13%. However, the longer term returns haven't been so bad, with the stock down 16% in the last three years.

Although the past week has been more reassuring for shareholders, they're still in the red over the last year, so let's see if the underlying business has been responsible for the decline.

Check out our latest analysis for CETC Digital TechnologyLtd

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

Unhappily, CETC Digital TechnologyLtd had to report a 6.1% decline in EPS over the last year. The share price decline of 24% 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).

Dive deeper into CETC Digital TechnologyLtd's key metrics by checking this interactive graph of CETC Digital TechnologyLtd's earnings, revenue and cash flow.

A Different Perspective

While the broader market lost about 13% in the twelve months, CETC Digital TechnologyLtd shareholders did even worse, losing 23% (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 3% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with CETC Digital TechnologyLtd (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

Of course CETC Digital TechnologyLtd may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.