Investors in Hunan Er-Kang Pharmaceutical (SZSE:300267) from five years ago are still down 43%, even after 8.2% gain this past week

For many, the main point of investing is to generate higher returns than the overall market. But even the best stock picker will only win with some selections. At this point some shareholders may be questioning their investment in Hunan Er-Kang Pharmaceutical Co., Ltd (SZSE:300267), since the last five years saw the share price fall 44%. Furthermore, it's down 11% in about a quarter. That's not much fun for holders.

Although the past week has been more reassuring for shareholders, they're still in the red over the last five years, so let's see if the underlying business has been responsible for the decline.

Check out our latest analysis for Hunan Er-Kang 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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

In the last half decade Hunan Er-Kang Pharmaceutical saw its share price fall as its EPS declined below zero. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. However, we can say we'd expect to see a falling share price in this scenario.

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

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

Hunan Er-Kang Pharmaceutical shareholders are up 14% for the year. But that return falls short of the market. But at least that's still a gain! Over five years the TSR has been a reduction of 7% per year, over five years. So this might be a sign the business has turned its fortunes around. 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. Even so, be aware that Hunan Er-Kang Pharmaceutical is showing 1 warning sign in our investment analysis , you should know about...

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.