The 34% return delivered to Gansu Longshenrongfa Pharmaceutical IndustryLTD's (SZSE:300534) shareholders actually lagged YoY earnings growth

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, long term Gansu Longshenrongfa Pharmaceutical Industry CO.,LTD (SZSE:300534) shareholders have enjoyed a 33% share price rise over the last half decade, well in excess of the market return of around 3.2% (not including dividends).

Since it's been a strong week for Gansu Longshenrongfa Pharmaceutical IndustryLTD shareholders, let's have a look at trend of the longer term fundamentals.

View our latest analysis for Gansu Longshenrongfa Pharmaceutical IndustryLTD

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 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.

Over half a decade, Gansu Longshenrongfa Pharmaceutical IndustryLTD managed to grow its earnings per share at 38% a year. This EPS growth is higher than the 6% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.

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

We regret to report that Gansu Longshenrongfa Pharmaceutical IndustryLTD shareholders are down 22% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 17%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 6% per year over half a decade. 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 Gansu Longshenrongfa Pharmaceutical IndustryLTD you might want to consider these 3 valuation metrics.

We will like Gansu Longshenrongfa Pharmaceutical IndustryLTD better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com