Sichuan Hebang Biotechnology's (SHSE:603077 one-year decrease in earnings delivers investors with a 30% loss

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. For example, the Sichuan Hebang Biotechnology Corporation Limited (SHSE:603077) share price is down 30% in the last year. That's well below the market decline of 14%. However, the longer term returns haven't been so bad, with the stock down 19% in the last three years. Shareholders have had an even rougher run lately, with the share price down 28% in the last 90 days.

After losing 5.1% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

See our latest analysis for Sichuan Hebang Biotechnology

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Unfortunately Sichuan Hebang Biotechnology reported an EPS drop of 71% for the last year. The share price fall of 30% isn't as bad as the reduction in earnings per share. It may have been that the weak EPS was not as bad as some had feared.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

We regret to report that Sichuan Hebang Biotechnology shareholders are down 30% for the year. Unfortunately, that's worse than the broader market decline of 14%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 3% 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. 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 Sichuan Hebang Biotechnology 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.

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