Positive earnings growth hasn't been enough to get Sino Biopharmaceutical (HKG:1177) shareholders a favorable return over the last year

Even the best stock pickers will make plenty of bad investments. Unfortunately, shareholders of Sino Biopharmaceutical Limited (HKG:1177) have suffered share price declines over the last year. To wit the share price is down 54% in that time. However, the longer term returns haven't been so bad, with the stock down 26% in the last three years. Shareholders have had an even rougher run lately, with the share price down 29% in the last 90 days. Of course, this share price action may well have been influenced by the 17% decline in the broader market, throughout the period.

While the last year has been tough for Sino Biopharmaceutical shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

See our latest analysis for Sino Biopharmaceutical

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 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.

Sino Biopharmaceutical stole the show with its EPS rocketing, in the last year. While the business is unlikely to sustain such a high growth rate for long, it's great to see. As a result, we're surprised to see the weak share price. Some different data might shed some more light on the situation.

With a low yield of 1.9% we doubt that the dividend influences the share price much. Sino Biopharmaceutical managed to grow revenue over the last year, which is usually a real positive. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling Sino Biopharmaceutical stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

We regret to report that Sino Biopharmaceutical shareholders are down 54% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 22%. 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. Longer term investors wouldn't be so upset, since they would have made 7%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Sino Biopharmaceutical better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with Sino Biopharmaceutical (including 2 which make us uncomfortable) .

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.

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

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.