Zhejiang CONBA PharmaceuticalLtd (SHSE:600572) sheds CN¥992m, company earnings and investor returns have been trending downwards for past year

Investors can approximate the average market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Investors in Zhejiang CONBA Pharmaceutical Co.,Ltd. (SHSE:600572) have tasted that bitter downside in the last year, as the share price dropped 35%. That falls noticeably short of the market decline of around 16%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 0.7% in three years. More recently, the share price has dropped a further 11% in a month. However, we note the price may have been impacted by the broader market, which is down 6.3% in the same time period.

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

See our latest analysis for Zhejiang CONBA PharmaceuticalLtd

There is no denying that markets are sometimes efficient, but prices do not always reflect 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.

Unfortunately Zhejiang CONBA PharmaceuticalLtd reported an EPS drop of 3.7% for the last year. The share price decline of 35% is actually more than the EPS drop. So it seems the market was too confident about the business, a year ago.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Dive deeper into Zhejiang CONBA PharmaceuticalLtd's key metrics by checking this interactive graph of Zhejiang CONBA PharmaceuticalLtd'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. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Zhejiang CONBA PharmaceuticalLtd, it has a TSR of -32% for the last 1 year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We regret to report that Zhejiang CONBA PharmaceuticalLtd shareholders are down 32% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 16%. 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 4% over the last half decade. 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. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Zhejiang CONBA PharmaceuticalLtd , and understanding them should be part of your investment process.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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