Realcan Pharmaceutical Group's (SZSE:002589) earnings have declined over five years, contributing to shareholders 67% loss

Realcan Pharmaceutical Group Co., Ltd. (SZSE:002589) shareholders should be happy to see the share price up 20% in the last quarter. But that doesn't change the fact that the returns over the last half decade have been disappointing. Indeed, the share price is down 67% in the period. So we're hesitant to put much weight behind the short term increase. However, in the best case scenario (far from fait accompli), this improved performance might be sustained.

While the last five years has been tough for Realcan Pharmaceutical 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.

Check out our latest analysis for Realcan Pharmaceutical Group

While Realcan Pharmaceutical Group made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.

In the last five years Realcan Pharmaceutical Group saw its revenue shrink by 32% per year. That puts it in an unattractive cohort, to put it mildly. Arguably, the market has responded appropriately to this business performance by sending the share price down 11% (annualized) in the same time period. It's fair to say most investors don't like to invest in loss making companies with falling revenue. You'd want to research this company pretty thoroughly before buying, it looks a bit too risky for us.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

It's probably worth noting that the CEO is paid less than the median at similar sized 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 Realcan Pharmaceutical Group's earnings, revenue and cash flow.

A Different Perspective

While the broader market lost about 6.0% in the twelve months, Realcan Pharmaceutical Group shareholders did even worse, losing 25% (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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 11% per year over five years. 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. Even so, be aware that Realcan Pharmaceutical Group is showing 2 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.