Shareholders in Zhong Fu Tong Group (SZSE:300560) have lost 15%, as stock drops 9.9% this past week

It's easy to match the overall market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. For example, the Zhong Fu Tong Group Co., Ltd. (SZSE:300560) share price is down 16% in the last year. That's disappointing when you consider the market returned 12%. On the other hand, the stock is actually up 7.4% over three years. On top of that, the share price is down 9.9% in the last week.

If the past week is anything to go by, investor sentiment for Zhong Fu Tong Group isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for Zhong Fu Tong Group

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).

Zhong Fu Tong Group 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. We hope for shareholders' sake that the company becomes profitable again soon.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free interactive report on Zhong Fu Tong Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Zhong Fu Tong Group shareholders are down 15% for the year (even including dividends), but the market itself is up 12%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 1.1% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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 - Zhong Fu Tong Group has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

Of course Zhong Fu Tong Group 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.