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Investing in stocks comes with the risk that the share price will fall. And there's no doubt that China Shenghai Food Holdings Company Limited (HKG:1676) stock has had a really bad year. The share price has slid 55% in that time. China Shenghai Food Holdings hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. The falls have accelerated recently, with the share price down 19% in the last three months. Of course, this share price action may well have been influenced by the 8.6% decline in the broader market, throughout the period.

See our latest analysis for China Shenghai Food Holdings

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Unhappily, China Shenghai Food Holdings had to report a 5.9% decline in EPS over the last year. The share price decline of 55% is actually more than the EPS drop. So it seems the market was too confident about the business, a year ago. The P/E ratio of 2.42 also points to the negative market sentiment.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It might be well worthwhile taking a look at our free report on China Shenghai Food Holdings's earnings, revenue and cash flow.

A Different Perspective

We doubt China Shenghai Food Holdings shareholders are happy with the loss of 55% over twelve months. That falls short of the market, which lost 9.8%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. With the stock down 19% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.

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 HK exchanges.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.