Investors five-year losses continue as Luye Pharma Group (HKG:2186) dips a further 3.6% this week, earnings continue to decline

We think intelligent long term investing is the way to go. But along the way some stocks are going to perform badly. Zooming in on an example, the Luye Pharma Group Ltd. (HKG:2186) share price dropped 54% in the last half decade. That is extremely sub-optimal, to say the least. We also note that the stock has performed poorly over the last year, with the share price down 22%. More recently, the share price has dropped a further 9.7% in a month.

After losing 3.6% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

View our latest analysis for Luye Pharma Group

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

During the five years over which the share price declined, Luye Pharma Group's earnings per share (EPS) dropped by 15% each year. This change in EPS is remarkably close to the 14% average annual decrease in the share price. This implies that the market has had a fairly steady view of the stock. So it's fair to say the share price has been responding to changes in EPS.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Luye Pharma Group has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Luye Pharma Group will grow revenue in the future.

A Different Perspective

Luye Pharma Group shareholders are down 22% for the year, but the market itself is up 23%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 9% over the last half decade. 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. Is Luye Pharma Group cheap compared to other companies? These 3 valuation measures might help you decide.

Of course Luye Pharma Group 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 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.