China Shineway Pharmaceutical Group's (HKG:2877 five-year decrease in earnings delivers investors with a 5.5% loss

By
Simply Wall St
Published
February 23, 2022
SEHK:2877
Source: Shutterstock

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the main game is to find enough winners to more than offset the losers So we wouldn't blame long term China Shineway Pharmaceutical Group Limited (HKG:2877) shareholders for doubting their decision to hold, with the stock down 29% over a half decade. The falls have accelerated recently, with the share price down 15% in the last three months.

After losing 10% 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 China Shineway Pharmaceutical Group

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 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 five years over which the share price declined, China Shineway Pharmaceutical Group's earnings per share (EPS) dropped by 6.9% each year. Notably, the share price has fallen at 7% per year, fairly close to the change in the EPS. This suggests that market participants have not changed their view of the company all that much. Rather, the share price change has reflected changes in earnings per share.

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

earnings-per-share-growth
SEHK:2877 Earnings Per Share Growth February 23rd 2022

It might be well worthwhile taking a look at our free report on China Shineway Pharmaceutical Group's earnings, revenue and cash flow.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for China Shineway Pharmaceutical Group the TSR over the last 5 years was -5.5%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that China Shineway Pharmaceutical Group shareholders have received a total shareholder return of 14% over one year. Of course, that includes the dividend. There's no doubt those recent returns are much better than the TSR loss of 1.1% per year over five years. 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 instance, we've identified 3 warning signs for China Shineway Pharmaceutical Group that you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.

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