While shareholders of Apeloa PharmaceuticalLtd (SZSE:000739) are in the red over the last three years, underlying earnings have actually grown

While not a mind-blowing move, it is good to see that the Apeloa Pharmaceutical Co.,Ltd (SZSE:000739) share price has gained 12% in the last three months. But that doesn't change the fact that the returns over the last three years have been disappointing. Tragically, the share price declined 57% in that time. So the improvement may be a real relief to some. After all, could be that the fall was overdone.

While the stock has risen 5.7% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

See our latest analysis for Apeloa PharmaceuticalLtd

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

Although the share price is down over three years, Apeloa PharmaceuticalLtd actually managed to grow EPS by 4.8% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.

It looks to us like the market was probably too optimistic around growth three years ago. Looking to other metrics might better explain the share price change.

The modest 1.9% dividend yield is unlikely to be guiding the market view of the stock. Revenue is actually up 12% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating Apeloa PharmaceuticalLtd further; while we may be missing something on this analysis, there might also be an opportunity.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free report showing analyst forecasts should help you form a view on Apeloa PharmaceuticalLtd

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. In the case of Apeloa PharmaceuticalLtd, it has a TSR of -55% for the last 3 years. 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

Apeloa PharmaceuticalLtd shareholders are up 3.1% for the year (even including dividends). But that return falls short of the market. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 6% over five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. 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. Even so, be aware that Apeloa PharmaceuticalLtd is showing 1 warning sign in our investment analysis , you should know about...

We will like Apeloa PharmaceuticalLtd 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.