The three-year shareholder returns and company earnings persist lower as Lepu Medical Technology (Beijing) (SZSE:300003) stock falls a further 7.6% in past week

If you love investing in stocks you're bound to buy some losers. But the last three years have been particularly tough on longer term Lepu Medical Technology (Beijing) Co., Ltd. (SZSE:300003) shareholders. Regrettably, they have had to cope with a 53% drop in the share price over that period. And the ride hasn't got any smoother in recent times over the last year, with the price 40% lower in that time. More recently, the share price has dropped a further 16% in a month.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

View our latest analysis for Lepu Medical Technology (Beijing)

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Lepu Medical Technology (Beijing) saw its EPS decline at a compound rate of 20% per year, over the last three years. This change in EPS is reasonably close to the 22% average annual decrease in the share price. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. It seems like the share price is reflecting the declining earnings per share.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Dive deeper into Lepu Medical Technology (Beijing)'s key metrics by checking this interactive graph of Lepu Medical Technology (Beijing)'s earnings, revenue and cash flow.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Lepu Medical Technology (Beijing)'s TSR for the last 3 years was -50%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market lost about 19% in the twelve months, Lepu Medical Technology (Beijing) shareholders did even worse, losing 39% (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 8% per year over five years. 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. It's always interesting to track share price performance over the longer term. But to understand Lepu Medical Technology (Beijing) better, we need to consider many other factors. For instance, we've identified 1 warning sign for Lepu Medical Technology (Beijing) that you should be aware of.

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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.

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