The three-year shareholder returns and company earnings persist lower as Zhejiang Wolwo Bio-Pharmaceutical (SZSE:300357) stock falls a further 3.8% in past week

Many investors define successful investing as beating the market average over the long term. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that's been the case for longer term Zhejiang Wolwo Bio-Pharmaceutical Co., Ltd. (SZSE:300357) shareholders, since the share price is down 47% in the last three years, falling well short of the market decline of around 3.1%.

If the past week is anything to go by, investor sentiment for Zhejiang Wolwo Bio-Pharmaceutical isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

Check out our latest analysis for Zhejiang Wolwo Bio-Pharmaceutical

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Zhejiang Wolwo Bio-Pharmaceutical saw its EPS decline at a compound rate of 1.2% per year, over the last three years. The share price decline of 19% 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).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

While the broader market gained around 15% in the last year, Zhejiang Wolwo Bio-Pharmaceutical shareholders lost 16% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 8% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Take risks, for example - Zhejiang Wolwo Bio-Pharmaceutical has 1 warning sign we think you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.