Guangdong Zhongsheng Pharmaceutical's (SZSE:002317) one-year decline in earnings translates into losses for shareholders

Investors can approximate the average market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in Guangdong Zhongsheng Pharmaceutical Co., Ltd. (SZSE:002317) have tasted that bitter downside in the last year, as the share price dropped 13%. That's disappointing when you consider the market returned 7.7%. However, the longer term returns haven't been so bad, with the stock down 7.5% in the last three years.

Although the past week has been more reassuring for shareholders, they're still in the red over the last year, so let's see if the underlying business has been responsible for the decline.

View our latest analysis for Guangdong Zhongsheng 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. 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.

Unfortunately Guangdong Zhongsheng Pharmaceutical reported an EPS drop of 63% for the last year. The share price fall of 13% isn't as bad as the reduction in earnings per share. It may have been that the weak EPS was not as bad as some had feared. With a P/E ratio of 81.17, it's fair to say the market sees an EPS rebound on the cards.

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

This free interactive report on Guangdong Zhongsheng Pharmaceutical's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market gained around 7.7% in the last year, Guangdong Zhongsheng Pharmaceutical shareholders lost 12% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 0.4% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Guangdong Zhongsheng Pharmaceutical better, we need to consider many other factors. Even so, be aware that Guangdong Zhongsheng Pharmaceutical is showing 2 warning signs in our investment analysis , you should know about...

But note: Guangdong Zhongsheng 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.