Investors in Jiangsu Hengrui Medicine (SHSE:600276) have unfortunately lost 23% over the last three years

Investors are understandably disappointed when a stock they own declines in value. But it's hard to avoid some disappointing investments when the overall market is down. The Jiangsu Hengrui Medicine Co., Ltd. (SHSE:600276) is down 24% over three years, but the total shareholder return is -23% once you include the dividend. That's better than the market which declined 25% over the last three years.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for Jiangsu Hengrui Medicine

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Jiangsu Hengrui Medicine saw its EPS decline at a compound rate of 12% per year, over the last three years. In comparison the 9% compound annual share price decline isn't as bad as the EPS drop-off. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines. This positive sentiment is also reflected in the generous P/E ratio of 59.41.

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

We know that Jiangsu Hengrui Medicine has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

A Different Perspective

Although it hurts that Jiangsu Hengrui Medicine returned a loss of 13% in the last twelve months, the broader market was actually worse, returning a loss of 19%. Given the total loss of 1.8% per year over five years, it seems returns have deteriorated in the last twelve months. While some investors do well specializing in buying companies that are struggling (but nonetheless undervalued), don't forget that Buffett said that 'turnarounds seldom turn'. Before forming an opinion on Jiangsu Hengrui Medicine you might want to consider these 3 valuation metrics.

Of course Jiangsu Hengrui Medicine 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.

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

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