Zhejiang Qianjiang Biochemical (SHSE:600796 investor five-year losses grow to 15% as the stock sheds CN¥425m this past week

For many, the main point of investing is to generate higher returns than the overall market. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in Zhejiang Qianjiang Biochemical Co., Ltd (SHSE:600796), since the last five years saw the share price fall 18%. Even worse, it's down 10% in about a month, which isn't fun at all.

With the stock having lost 10.0% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

See our latest analysis for Zhejiang Qianjiang Biochemical

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 five years of share price growth, Zhejiang Qianjiang Biochemical moved from a loss to profitability. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics may better explain the share price move.

We don't think that the 0.7% is big factor in the share price, since it's quite small, as dividends go. In contrast to the share price, revenue has actually increased by 27% a year in the five year period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.

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

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Zhejiang Qianjiang Biochemical's TSR for the last 5 years was -15%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While the broader market lost about 9.6% in the twelve months, Zhejiang Qianjiang Biochemical shareholders did even worse, losing 13% (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. 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. 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. 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. Take risks, for example - Zhejiang Qianjiang Biochemical has 1 warning sign we think you should be aware of.

But note: Zhejiang Qianjiang Biochemical may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.