Chongqing Zhifei Biological Products (SZSE:300122) shareholders have endured a 65% loss from investing in the stock three years ago

Chongqing Zhifei Biological Products Co., Ltd. (SZSE:300122) shareholders will doubtless be very grateful to see the share price up 58% in the last month. Meanwhile over the last three years the stock has dropped hard. Regrettably, the share price slid 67% in that period. So the improvement may be a real relief to some. Perhaps the company has turned over a new leaf.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

See our latest analysis for Chongqing Zhifei Biological Products

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).

Chongqing Zhifei Biological Products saw its EPS decline at a compound rate of 6.0% per year, over the last three years. 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 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. This free interactive report on Chongqing Zhifei Biological Products' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Chongqing Zhifei Biological Products shareholders are down 39% for the year (even including dividends), but the market itself is up 6.8%. 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 1.2%, each year, over five years. 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Chongqing Zhifei Biological Products is showing 2 warning signs in our investment analysis , and 1 of those is a bit concerning...

But note: Chongqing Zhifei Biological Products 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.