Shareholders in Shanxi Zhendong PharmaceuticalLtd (SZSE:300158) have lost 8.5%, as stock drops 7.1% this past week

Shanxi Zhendong Pharmaceutical Co.,Ltd (SZSE:300158) shareholders should be happy to see the share price up 22% in the last quarter. It's not great that the stock is down over the last three years. But that's not so bad when you consider its market is down 15%.

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

See our latest analysis for Shanxi Zhendong PharmaceuticalLtd

Because Shanxi Zhendong PharmaceuticalLtd made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually desire strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

Over the last three years, Shanxi Zhendong PharmaceuticalLtd's revenue dropped 17% per year. That means its revenue trend is very weak compared to other loss making companies. On the face of it we'd posit the share price fall of 9% compound, over three years is well justified by the fundamental deterioration. The key question now is whether the company has the capacity to fund itself to profitability, without more cash. The company will need to return to revenue growth as quickly as possible, if it wants to see some enthusiasm from investors.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About The Total Shareholder Return (TSR)?

We've already covered Shanxi Zhendong PharmaceuticalLtd's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that Shanxi Zhendong PharmaceuticalLtd's TSR, which was a 8.5% drop over the last 3 years, was not as bad as the share price return.

A Different Perspective

While the broader market gained around 6.0% in the last year, Shanxi Zhendong PharmaceuticalLtd shareholders lost 24%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 7%, 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 1 warning sign for Shanxi Zhendong PharmaceuticalLtd that you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.