Further weakness as Zhejiang Starry PharmaceuticalLtd (SHSE:603520) drops 15% this week, taking three-year losses to 76%

It's not possible to invest over long periods without making some bad investments. But you have a problem if you face massive losses more than once in a while. So spare a thought for the long term shareholders of Zhejiang Starry Pharmaceutical Co.,Ltd. (SHSE:603520); the share price is down a whopping 77% in the last three years. That would certainly shake our confidence in the decision to own the stock. And more recent buyers are having a tough time too, with a drop of 39% in the last year. Even worse, it's down 16% in about a month, which isn't fun at all.

After losing 15% 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 Zhejiang Starry PharmaceuticalLtd

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. 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.

Over the three years that the share price declined, Zhejiang Starry PharmaceuticalLtd's earnings per share (EPS) dropped significantly, falling to a loss. This was, in part, due to extraordinary items impacting earnings. Due to the loss, it's not easy to use EPS as a reliable guide to the business. However, we can say we'd expect to see a falling share price in this scenario.

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

Dive deeper into Zhejiang Starry PharmaceuticalLtd's key metrics by checking this interactive graph of Zhejiang Starry PharmaceuticalLtd's earnings, revenue and cash flow.

A Different Perspective

While the broader market lost about 20% in the twelve months, Zhejiang Starry PharmaceuticalLtd shareholders did even worse, losing 38% (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 0.4% 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. Case in point: We've spotted 2 warning signs for Zhejiang Starry PharmaceuticalLtd you should be aware of.

But note: Zhejiang Starry PharmaceuticalLtd 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.