PharmaBlock Sciences (Nanjing) (SZSE:300725) sheds CN¥543m, company earnings and investor returns have been trending downwards for past three years

While it may not be enough for some shareholders, we think it is good to see the PharmaBlock Sciences (Nanjing), Inc. (SZSE:300725) share price up 11% in a single quarter. But that is meagre solace in the face of the shocking decline over three years. To wit, the share price sky-dived 78% in that time. So it sure is nice to see a bit of an improvement. Of course the real question is whether the business can sustain a turnaround.

If the past week is anything to go by, investor sentiment for PharmaBlock Sciences (Nanjing) isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for PharmaBlock Sciences (Nanjing)

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.

PharmaBlock Sciences (Nanjing) saw its EPS decline at a compound rate of 7.5% per year, over the last three years. The share price decline of 40% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past.

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 PharmaBlock Sciences (Nanjing) shareholders are down 39% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 8.7%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6% 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. 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. Case in point: We've spotted 2 warning signs for PharmaBlock Sciences (Nanjing) you should be aware of.

Of course PharmaBlock Sciences (Nanjing) may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.