Earnings growth of 2.9% over 1 year hasn't been enough to translate into positive returns for HPGC Renmintongtai Pharmaceutical (SHSE:600829) shareholders

Investors can approximate the average 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. For example, the HPGC Renmintongtai Pharmaceutical Corporation (SHSE:600829) share price is down 18% in the last year. That contrasts poorly with the market decline of 10%. At least the damage isn't so bad if you look at the last three years, since the stock is down 8.3% in that time. Even worse, it's down 17% in about a month, which isn't fun at all.

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

See our latest analysis for HPGC Renmintongtai Pharmaceutical

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 unfortunate twelve months during which the HPGC Renmintongtai Pharmaceutical share price fell, it actually saw its earnings per share (EPS) improve by 2.9%. Of course, the situation might betray previous over-optimism about growth.

By glancing at these numbers, we'd posit that the the market had expectations of much higher growth, last year. But looking to other metrics might better explain the share price change.

HPGC Renmintongtai Pharmaceutical's revenue is actually up 3.7% over the last year. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

This free interactive report on HPGC Renmintongtai Pharmaceutical's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

We regret to report that HPGC Renmintongtai Pharmaceutical shareholders are down 18% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 10%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. For example, we've discovered 1 warning sign for HPGC Renmintongtai Pharmaceutical that you should be aware of before investing here.

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.

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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.