Inner Mongolia Furui Medical Science's (SZSE:300049) five-year earnings growth trails the 33% YoY shareholder returns

Some Inner Mongolia Furui Medical Science Co., Ltd. (SZSE:300049) shareholders are probably rather concerned to see the share price fall 39% over the last three months. But that doesn't undermine the fantastic longer term performance (measured over five years). In that time, the share price has soared some 320% higher! Arguably, the recent fall is to be expected after such a strong rise. But the real question is whether the business fundamentals can improve over the long term.

Since the stock has added CN¥439m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Inner Mongolia Furui Medical Science

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 five years of share price growth, Inner Mongolia Furui Medical Science achieved compound earnings per share (EPS) growth of 172% per year. The EPS growth is more impressive than the yearly share price gain of 33% over the same period. So it seems the market isn't so enthusiastic about the stock these days. Of course, with a P/E ratio of 64.77, the market remains optimistic.

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on Inner Mongolia Furui Medical Science's earnings, revenue and cash flow.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Inner Mongolia Furui Medical Science's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Inner Mongolia Furui Medical Science's TSR of 323% for the 5 years exceeded its share price return, because it has paid dividends.

A Different Perspective

While the broader market gained around 12% in the last year, Inner Mongolia Furui Medical Science shareholders lost 22%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 33%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Before forming an opinion on Inner Mongolia Furui Medical Science you might want to consider these 3 valuation metrics.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.