Guizhou Xinbang Pharmaceutical (SZSE:002390) sheds CN¥381m, company earnings and investor returns have been trending downwards for past three years

Investing in stocks inevitably means buying into some companies that perform poorly. But the last three years have been particularly tough on longer term Guizhou Xinbang Pharmaceutical Co., Ltd. (SZSE:002390) shareholders. Regrettably, they have had to cope with a 68% drop in the share price over that period. And over the last year the share price fell 28%, so we doubt many shareholders are delighted. Shareholders have had an even rougher run lately, with the share price down 14% in the last 90 days. However, one could argue that the price has been influenced by the general market, which is down 14% in the same timeframe.

After losing 5.9% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

View our latest analysis for Guizhou Xinbang Pharmaceutical

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.

During the three years that the share price fell, Guizhou Xinbang Pharmaceutical's earnings per share (EPS) dropped by 1.4% each year. The share price decline of 31% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

While the broader market lost about 17% in the twelve months, Guizhou Xinbang Pharmaceutical shareholders did even worse, losing 27% (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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 7% per year over five years. 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 Guizhou Xinbang Pharmaceutical better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Guizhou Xinbang Pharmaceutical you should know about.

We will like Guizhou Xinbang Pharmaceutical 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.

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

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.