Wuhan Raycus Fiber Laser TechnologiesLtd's (SZSE:300747) earnings trajectory could turn positive as the stock increases 3.6% this past week

For many investors, the main point of stock picking is to generate higher returns than the overall market. But if you try your hand at stock picking, you risk returning less than the market. We regret to report that long term Wuhan Raycus Fiber Laser Technologies Co.,Ltd. (SZSE:300747) shareholders have had that experience, with the share price dropping 37% in three years, versus a market return of about 6.9%.

On a more encouraging note the company has added CN¥412m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

Check out our latest analysis for Wuhan Raycus Fiber Laser TechnologiesLtd

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Wuhan Raycus Fiber Laser TechnologiesLtd saw its EPS decline at a compound rate of 32% per year, over the last three years. 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. With a P/E ratio of 71.67, it's fair to say the market sees a brighter future for the business.

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

It might be well worthwhile taking a look at our free report on Wuhan Raycus Fiber Laser TechnologiesLtd's earnings, revenue and cash flow.

A Different Perspective

While the broader market gained around 15% in the last year, Wuhan Raycus Fiber Laser TechnologiesLtd shareholders lost 2.5% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. However, the loss over the last year isn't as bad as the 5% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. 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 Wuhan Raycus Fiber Laser TechnologiesLtd , and understanding them should be part of your investment process.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.