1.3% earnings growth over 5 years has not materialized into gains for Hunan Hansen Pharmaceutical (SZSE:002412) shareholders over that period

We think intelligent long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. Zooming in on an example, the Hunan Hansen Pharmaceutical Co., Ltd. (SZSE:002412) share price dropped 54% in the last half decade. We certainly feel for shareholders who bought near the top. Even worse, it's down 12% in about a month, which isn't fun at all.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

View our latest analysis for Hunan Hansen Pharmaceutical

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 unfortunate half decade during which the share price slipped, Hunan Hansen Pharmaceutical actually saw its earnings per share (EPS) improve by 6.6% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

Because of the sharp contrast between the EPS growth rate and the share price growth, we're inclined to look to other metrics to understand the changing market sentiment around the stock.

Revenue is actually up 2.2% over the time period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Take a more thorough look at Hunan Hansen Pharmaceutical's financial health with this free report on its balance sheet.

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Hunan Hansen Pharmaceutical's total shareholder return (TSR) and its share price return. 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. Its history of dividend payouts mean that Hunan Hansen Pharmaceutical's TSR, which was a 51% drop over the last 5 years, was not as bad as the share price return.

A Different Perspective

We regret to report that Hunan Hansen Pharmaceutical shareholders are down 20% for the year. Unfortunately, that's worse than the broader market decline of 10%. 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 9% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Is Hunan Hansen Pharmaceutical cheap compared to other companies? These 3 valuation measures might help you decide.

But note: Hunan Hansen 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.