Shanghai Hi-Tech Control System (SZSE:002184) shareholders have lost 35% over 1 year, earnings decline likely the culprit

Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Investors in Shanghai Hi-Tech Control System Co., Ltd (SZSE:002184) have tasted that bitter downside in the last year, as the share price dropped 36%. That's well below the market decline of 10%. Notably, shareholders had a tough run over the longer term, too, with a drop of 33% in the last three years. The falls have accelerated recently, with the share price down 31% in the last three months.

If the past week is anything to go by, investor sentiment for Shanghai Hi-Tech Control System isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

Check out our latest analysis for Shanghai Hi-Tech Control System

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

Unhappily, Shanghai Hi-Tech Control System had to report a 43% decline in EPS over the last year. We note that the 36% share price drop is very close to the EPS drop. Therefore one could posit that the market has not become more concerned about the company, despite the lower EPS. Rather, the share price has approximately tracked EPS growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

This free interactive report on Shanghai Hi-Tech Control System's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

We regret to report that Shanghai Hi-Tech Control System shareholders are down 35% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 10%. 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. Longer term investors wouldn't be so upset, since they would have made 4%, 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. 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. Take risks, for example - Shanghai Hi-Tech Control System has 2 warning signs we think you should be aware of.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.