Hubei Jumpcan Pharmaceutical (SHSE:600566) sheds 5.6% this week, as yearly returns fall more in line with earnings growth

It hasn't been the best quarter for Hubei Jumpcan Pharmaceutical Co., Ltd. (SHSE:600566) shareholders, since the share price has fallen 15% in that time. But that doesn't change the fact that the returns over the last three years have been pleasing. In the last three years the share price is up, 55%: better than the market.

Since the long term performance has been good but there's been a recent pullback of 5.6%, let's check if the fundamentals match the share price.

View our latest analysis for Hubei Jumpcan Pharmaceutical

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

During three years of share price growth, Hubei Jumpcan Pharmaceutical achieved compound earnings per share growth of 19% per year. The average annual share price increase of 16% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat. We'd venture the lowish P/E ratio of 9.40 also reflects the negative sentiment around the stock.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

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

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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Hubei Jumpcan Pharmaceutical the TSR over the last 3 years was 71%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Hubei Jumpcan Pharmaceutical shareholders are down 7.5% for the year (even including dividends), but the market itself is up 7.6%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 8%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Case in point: We've spotted 1 warning sign for Hubei Jumpcan Pharmaceutical you should be aware of.

We will like Hubei Jumpcan Pharmaceutical better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.