Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Investors in Hong Fok Corporation Limited (SGX:H30) have tasted that bitter downside in the last year, as the share price dropped 21%. That contrasts poorly with the market decline of 1.1%. At least the damage isn't so bad if you look at the last three years, since the stock is down 6.2% in that time. Furthermore, it's down 10% in about a quarter. That's not much fun for holders.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

Check out our latest analysis for Hong Fok

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Unhappily, Hong Fok had to report a 59% decline in EPS over the last year. This fall in the EPS is significantly worse than the 21% the share price fall. It may have been that the weak EPS was not as bad as some had feared.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It might be well worthwhile taking a look at our free report on Hong Fok's earnings, revenue and cash flow.

A Different Perspective

Hong Fok shareholders are down 20% for the year (even including dividends), but the market itself is up 1.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 0.9% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. To that end, you should learn about the 3 warning signs we've spotted with Hong Fok (including 1 which doesn't sit too well with us) .

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