The five-year underlying earnings growth at CMG Pharmaceutical (KOSDAQ:058820) is promising, but the shareholders are still in the red over that time

We think intelligent long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. Zooming in on an example, the CMG Pharmaceutical Co., Ltd. (KOSDAQ:058820) share price dropped 53% in the last half decade. That's not a lot of fun for true believers. Shareholders have had an even rougher run lately, with the share price down 18% in the last 90 days. Of course, this share price action may well have been influenced by the 7.2% decline in the broader market, throughout the period.

If the past week is anything to go by, investor sentiment for CMG Pharmaceutical isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for CMG Pharmaceutical

There is no denying that markets are sometimes efficient, but prices do not always reflect 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.

While the share price declined over five years, CMG Pharmaceutical actually managed to increase EPS by an average of 4.0% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

Based on these numbers, we'd venture that the market may have been over-optimistic about forecast growth, half a decade ago. Having said that, we might get a better idea of what's going on with the stock by looking at other metrics.

Revenue is actually up 11% over the time 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.

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

Take a more thorough look at CMG Pharmaceutical's financial health with this free report on its balance sheet.

A Different Perspective

Investors in CMG Pharmaceutical had a tough year, with a total loss of 13%, against a market gain of about 1.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 9% per annum loss investors have suffered over the last half decade. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. It's always interesting to track share price performance over the longer term. But to understand CMG Pharmaceutical better, we need to consider many other factors. Even so, be aware that CMG Pharmaceutical is showing 1 warning sign in our investment analysis , you should know about...

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 South Korean 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.