Investors can approximate the average market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by Shanghai Haohai Biological Technology Co., Ltd. (HKG:6826) shareholders over the last year, as the share price declined 33%. That's well bellow the market return of -7.2%. At least the damage isn't so bad if you look at the last three years, since the stock is down 7.5% in that time. The falls have accelerated recently, with the share price down 17% in the last three months. However, one could argue that the price has been influenced by the general market, which is down 7.8% in the same timeframe.

See our latest analysis for Shanghai Haohai Biological Technology

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Unfortunately Shanghai Haohai Biological Technology reported an EPS drop of 5.5% for the last year. This reduction in EPS is not as bad as the 33% share price fall. So it seems the market was too confident about the business, a year ago.

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

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. Dive deeper into the earnings by checking this interactive graph of Shanghai Haohai Biological Technology's earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

We've already covered Shanghai Haohai Biological Technology's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that Shanghai Haohai Biological Technology's TSR, which was a 32% drop over the last year, was not as bad as the share price return.

A Different Perspective

Shanghai Haohai Biological Technology shareholders are down 32% for the year (even including dividends) , falling short of the market return. Meanwhile, the broader market slid about 7.2%, likely weighing on the stock. The three-year loss of 1.4% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.