Luye Pharma Group's (HKG:2186) Shareholders Are Down 31% On Their Shares

It is doubtless a positive to see that the Luye Pharma Group Ltd. (HKG:2186) share price has gained some 32% in the last three months. But that cannot eclipse the less-than-impressive returns over the last three years. In fact, the share price is down 31% in the last three years, falling well short of the market return.

See 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 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).

During the unfortunate three years of share price decline, Luye Pharma Group actually saw its earnings per share (EPS) improve by 16% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

We note that, in three years, revenue has actually grown at a 23% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating Luye Pharma Group further; while we may be missing something on this analysis, there might also be an opportunity.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Luye Pharma Group's total shareholder return (TSR) and its share price change, which we've covered above. 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. Dividends have been really beneficial for Luye Pharma Group shareholders, and that cash payout explains why its total shareholder loss of 28%, over the last 3 years, isn't as bad as the share price return.

A Different Perspective

Luye Pharma Group shareholders are up 31% for the year. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 1.4% endured over half a decade. So this might be a sign the business has turned its fortunes around. It's always interesting to track share price performance over the longer term. But to understand Luye Pharma Group better, we need to consider many other factors. To that end, you should learn about the 4 warning signs we've spotted with Luye Pharma Group (including 2 which are significant) .

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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

If you decide to trade Luye Pharma Group, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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