Investors who have held Shandong Mining Machinery Group (SZSE:002526) over the last year have watched its earnings decline along with their investment

Shandong Mining Machinery Group Co., Ltd. (SZSE:002526) shareholders should be happy to see the share price up 13% in the last week. But in truth the last year hasn't been good for the share price. In fact, the price has declined 14% in a year, falling short of the returns you could get by investing in an index fund.

While the last year has been tough for Shandong Mining Machinery Group shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

View our latest analysis for Shandong Mining Machinery Group

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 Shandong Mining Machinery Group reported an EPS drop of 52% for the last year. This fall in the EPS is significantly worse than the 14% the share price fall. It may have been that the weak EPS was not as bad as some had feared.

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

This free interactive report on Shandong Mining Machinery Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market lost about 10% in the twelve months, Shandong Mining Machinery Group shareholders did even worse, losing 13% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 2% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Shandong Mining Machinery Group has 4 warning signs (and 2 which are potentially serious) we think you should know about.

For those who like to find winning investments this free list of undervalued 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 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.