A Look At Fusen Pharmaceutical's (HKG:1652) Share Price Returns

Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. That downside risk was realized by Fusen Pharmaceutical Company Limited (HKG:1652) shareholders over the last year, as the share price declined 15%. That's well below the market return of 25%. Because Fusen Pharmaceutical hasn't been listed for many years, the market is still learning about how the business performs. In the last ninety days we've seen the share price slide 48%.

See our latest analysis for Fusen Pharmaceutical

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Unhappily, Fusen Pharmaceutical had to report a 10% decline in EPS over the last year. The share price decline of 15% is actually more than the EPS drop. So it seems the market was too confident about the business, a year ago.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of Fusen Pharmaceutical's earnings, revenue and cash flow.

A Different Perspective

While Fusen Pharmaceutical shareholders are down 15% for the year (even including dividends), the market itself is up 25%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. It's worth noting that the last three months did the real damage, with a 48% decline. This probably signals that the business has recently disappointed shareholders - it will take time to win them back. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Fusen Pharmaceutical (at least 1 which is concerning) , and understanding them should be part of your investment process.

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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