Further weakness as Zhejiang Hisoar Pharmaceutical (SZSE:002099) drops 9.0% this week, taking one-year losses to 40%

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 Hisoar Pharmaceutical Co., Ltd. (SZSE:002099) have tasted that bitter downside in the last year, as the share price dropped 40%. That falls noticeably short of the market decline of around 14%. Even if you look out three years, the returns are still disappointing, with the share price down31% in that time. More recently, the share price has dropped a further 9.2% in a month. But this could be related to poor market conditions -- stocks are down 4.7% in the same time.

If the past week is anything to go by, investor sentiment for Zhejiang Hisoar Pharmaceutical isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for Zhejiang Hisoar Pharmaceutical

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the last year Zhejiang Hisoar Pharmaceutical saw its earnings per share drop below zero. Buyers no doubt think it's a temporary situation, but those with a nose for quality have low tolerance for losses. Of course, if the company can turn the situation around, investors will likely profit.

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

It might be well worthwhile taking a look at our free report on Zhejiang Hisoar Pharmaceutical's earnings, revenue and cash flow.

A Different Perspective

While the broader market lost about 14% in the twelve months, Zhejiang Hisoar Pharmaceutical shareholders did even worse, losing 40%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. 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. It's always interesting to track share price performance over the longer term. But to understand Zhejiang Hisoar Pharmaceutical better, we need to consider many other factors. Take risks, for example - Zhejiang Hisoar Pharmaceutical has 1 warning sign we think you should be aware of.

But note: Zhejiang Hisoar Pharmaceutical 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.

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