Investors one-year losses continue as JW Pharmaceutical (KRX:001060) dips a further 9.7% this week, earnings continue to decline

The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. That downside risk was realized by JW Pharmaceutical Corporation (KRX:001060) shareholders over the last year, as the share price declined 39%. That's well below the market decline of 2.0%. On the bright side, the stock is actually up 9.6% in the last three years. On top of that, the share price is down 9.7% in the last week. However, this move may have been influenced by the broader market, which fell 5.4% in that time.

Since JW Pharmaceutical has shed ₩71b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out our latest analysis for JW Pharmaceutical

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 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.

Unfortunately JW Pharmaceutical reported an EPS drop of 29% for the last year. This reduction in EPS is not as bad as the 39% share price fall. So it seems the market was too confident about the business, a year ago.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It is of course excellent to see how JW Pharmaceutical has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

While the broader market lost about 2.0% in the twelve months, JW Pharmaceutical shareholders did even worse, losing 38% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand JW Pharmaceutical better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for JW Pharmaceutical you should know about.

If you are like me, then you will not want to miss this free list of undervalued small caps 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 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.