The one-year underlying earnings growth at Anhui Tongfeng Electronics (SHSE:600237) is promising, but the shareholders are still in the red over that time

The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. That downside risk was realized by Anhui Tongfeng Electronics Company Limited (SHSE:600237) shareholders over the last year, as the share price declined 32%. That contrasts poorly with the market decline of 10%. At least the damage isn't so bad if you look at the last three years, since the stock is down 13% in that time. Unfortunately the share price momentum is still quite negative, with prices down 13% in thirty days.

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 Anhui Tongfeng Electronics

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.

During the unfortunate twelve months during which the Anhui Tongfeng Electronics share price fell, it actually saw its earnings per share (EPS) improve by 13%. It could be that the share price was previously over-hyped.

The divergence between the EPS and the share price is quite notable, during the year. So it's easy to justify a look at some other metrics.

Anhui Tongfeng Electronics managed to grow revenue over the last year, which is usually a real positive. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We know that Anhui Tongfeng Electronics has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Anhui Tongfeng Electronics' financial health with this free report on its balance sheet.

A Different Perspective

While the broader market lost about 10% in the twelve months, Anhui Tongfeng Electronics shareholders did even worse, losing 32%. 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 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 - Anhui Tongfeng Electronics has 1 warning sign 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.