Should Shanghai Fudan-Zhangjiang Bio-Pharmaceutical (HKG:1349) Be Disappointed With Their 38% Profit?

By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. Just take a look at Shanghai Fudan-Zhangjiang Bio-Pharmaceutical Co., Ltd. (HKG:1349), which is up 38%, over three years, soundly beating the market decline of 15% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 16% in the last year , including dividends .

Check out our latest analysis for Shanghai Fudan-Zhangjiang Bio-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).

Shanghai Fudan-Zhangjiang Bio-Pharmaceutical was able to grow its EPS at 20% per year over three years, sending the share price higher. This EPS growth is higher than the 11% average annual increase in the share price. So it seems investors have become more cautious about the company, over time.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

This free interactive report on Shanghai Fudan-Zhangjiang Bio-Pharmaceutical's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Shanghai Fudan-Zhangjiang Bio-Pharmaceutical, it has a TSR of 43% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Shanghai Fudan-Zhangjiang Bio-Pharmaceutical shareholders gained a total return of 16% during the year. Unfortunately this falls short of the market return. But at least that's still a gain! Over five years the TSR has been a reduction of 1.6% per year, over five years. It could well be that the business is stabilizing. 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. For instance, we've identified 2 warning signs for Shanghai Fudan-Zhangjiang Bio-Pharmaceutical that you should be aware of.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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

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This article by Simply Wall St is general in nature. 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.
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