While shareholders of YiChang HEC ChangJiang Pharmaceutical (HKG:1558) are in the red over the last five years, underlying earnings have actually grown

Generally speaking long term investing is the way to go. But no-one is immune from buying too high. For example, after five long years the YiChang HEC ChangJiang Pharmaceutical Co., Ltd. (HKG:1558) share price is a whole 53% lower. That's not a lot of fun for true believers. Shareholders have had an even rougher run lately, with the share price down 24% in the last 90 days.

While the last five years has been tough for YiChang HEC ChangJiang Pharmaceutical 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.

View our latest analysis for YiChang HEC ChangJiang Pharmaceutical

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

While the share price declined over five years, YiChang HEC ChangJiang Pharmaceutical actually managed to increase EPS by an average of 17% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.

Because of the sharp contrast between the EPS growth rate and the share price growth, we're inclined to look to other metrics to understand the changing market sentiment around the stock.

In contrast to the share price, revenue has actually increased by 2.7% a year in the five year period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We know that YiChang HEC ChangJiang Pharmaceutical has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on YiChang HEC ChangJiang Pharmaceutical's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About The Total Shareholder Return (TSR)?

We've already covered YiChang HEC ChangJiang Pharmaceutical's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that YiChang HEC ChangJiang Pharmaceutical's TSR, which was a 50% drop over the last 5 years, was not as bad as the share price return.

A Different Perspective

We're pleased to report that YiChang HEC ChangJiang Pharmaceutical shareholders have received a total shareholder return of 41% over one year. That certainly beats the loss of about 8% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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 example, we've discovered 1 warning sign for YiChang HEC ChangJiang Pharmaceutical that you should be aware of before investing here.

But note: YiChang HEC ChangJiang Pharmaceutical may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong 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