It's easy to match the overall 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. That downside risk was realized by Jiangsu Innovative Ecological New Materials Limited (HKG:2116) shareholders over the last year, as the share price declined 45%. That falls noticeably short of the market return of around -15%. Jiangsu Innovative Ecological New Materials hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. Shareholders have had an even rougher run lately, with the share price down 13% in the last 90 days. Of course, this share price action may well have been influenced by the 11% decline in the broader market, throughout the period.

Check out our latest analysis for Jiangsu Innovative Ecological New Materials

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

During the unfortunate twelve months during which the Jiangsu Innovative Ecological New Materials share price fell, it actually saw its earnings per share (EPS) improve by 12%. It's quite possible that growth expectations may have been unreasonable in the past.

It's fair to say that the share price does not seem to be reflecting the EPS growth. But we might find some different metrics explain the share price movements better.

On the other hand, we're certainly perturbed by the 5.7% decline in Jiangsu Innovative Ecological New Materials's revenue. Many investors see falling revenue as a likely precursor to lower earnings, so this could well explain the weak share price.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on Jiangsu Innovative Ecological New Materials's earnings, revenue and cash flow.

A Different Perspective

Jiangsu Innovative Ecological New Materials shareholders are down 43% for the year (even including dividends) , even worse than the market loss of 15%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. With the stock down 13% 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. It's always interesting to track share price performance over the longer term. But to understand Jiangsu Innovative Ecological New Materials better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Jiangsu Innovative Ecological New Materials (of which 1 can't be ignored!) you should know about.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.

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.

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. Thank you for reading.