HPGC Renmintongtai Pharmaceutical (SHSE:600829) investors are up 9.9% in the past week, but earnings have declined over the last year

Passive investing in index funds can generate returns that roughly match the overall market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the HPGC Renmintongtai Pharmaceutical Corporation (SHSE:600829) share price is 31% higher than it was a year ago, much better than the market return of around 15% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! Longer term, the stock is up 28% in three years.

Since it's been a strong week for HPGC Renmintongtai Pharmaceutical shareholders, let's have a look at trend of the longer term fundamentals.

Check out our latest analysis for HPGC Renmintongtai Pharmaceutical

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. 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 last year, HPGC Renmintongtai Pharmaceutical actually saw its earnings per share drop 18%.

So we don't think that investors are paying too much attention to EPS. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.

We doubt the modest 1.7% dividend yield is doing much to support the share price. Revenue was pretty stable on last year, so deeper research might be needed to explain the share price rise.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

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.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, HPGC Renmintongtai Pharmaceutical's TSR for the last 1 year was 35%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that HPGC Renmintongtai Pharmaceutical shareholders have received a total shareholder return of 35% over one year. That's including the dividend. That gain is better than the annual TSR over five years, which is 4%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 instance, we've identified 2 warning signs for HPGC Renmintongtai Pharmaceutical that you should be aware of.

Of course HPGC Renmintongtai Pharmaceutical may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.