Shareholders in Zhejiang Tianyu Pharmaceutical (SZSE:300702) have lost 51%, as stock drops 7.8% this past week

The truth is that if you invest for long enough, you're going to end up with some losing stocks. Long term Zhejiang Tianyu Pharmaceutical Co., Ltd. (SZSE:300702) shareholders know that all too well, since the share price is down considerably over three years. Regrettably, they have had to cope with a 52% drop in the share price over that period. And more recent buyers are having a tough time too, with a drop of 29% in the last year. More recently, the share price has dropped a further 11% in a month. However, we note the price may have been impacted by the broader market, which is down 6.0% in the same time period.

After losing 7.8% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

Check out our latest analysis for Zhejiang Tianyu Pharmaceutical

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).

Zhejiang Tianyu Pharmaceutical has made a profit in the past. On the other hand, it reported a trailing twelve months loss, suggesting it isn't reliably profitable. Other metrics might give us a better handle on how its value is changing over time.

With a rather small yield of just 0.3% we doubt that the stock's share price is based on its dividend. The company has kept revenue pretty healthy over the last three years, so we doubt that explains the falling share price. There doesn't seem to be any clear correlation between the fundamental business metrics and the share price. That could mean that the stock was previously overrated, or it could spell opportunity now.

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

Take a more thorough look at Zhejiang Tianyu Pharmaceutical's financial health with this free report on its balance sheet.

A Different Perspective

While the broader market lost about 17% in the twelve months, Zhejiang Tianyu Pharmaceutical shareholders did even worse, losing 29% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. You could get a better understanding of Zhejiang Tianyu Pharmaceutical's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

We will like Zhejiang Tianyu Pharmaceutical 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