Topchoice Medical (SHSE:600763) sheds CN¥868m, company earnings and investor returns have been trending downwards for past three years

While not a mind-blowing move, it is good to see that the Topchoice Medical Co., Inc. (SHSE:600763) share price has gained 15% in the last three months. But over the last three years we've seen a quite serious decline. Tragically, the share price declined 66% in that time. So it's good to see it climbing back up. Perhaps the company has turned over a new leaf.

If the past week is anything to go by, investor sentiment for Topchoice Medical isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for Topchoice Medical

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the three years that the share price fell, Topchoice Medical's earnings per share (EPS) dropped by 12% each year. The share price decline of 30% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past.

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

A Different Perspective

While the broader market gained around 12% in the last year, Topchoice Medical shareholders lost 7.0% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. However, the loss over the last year isn't as bad as the 6% per annum loss investors have suffered over the last half decade. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. 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 be aware of the 1 warning sign we've spotted with Topchoice Medical .

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 Chinese exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.