While China Shineway Pharmaceutical Group Limited (HKG:2877) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 15% in the last quarter. But at least the stock is up over the last five years. However we are not very impressed because the share price is only up 45%, less than the market return of 54%.
Since the long term performance has been good but there's been a recent pullback of 5.9%, let's check if the fundamentals match the share price.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Over half a decade, China Shineway Pharmaceutical Group managed to grow its earnings per share at 17% a year. This EPS growth is higher than the 8% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. The reasonably low P/E ratio of 5.41 also suggests market apprehension.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how China Shineway Pharmaceutical Group 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.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, China Shineway Pharmaceutical Group's TSR for the last 5 years was 104%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Investors in China Shineway Pharmaceutical Group had a tough year, with a total loss of 8.5% (including dividends), against a market gain of about 37%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 15% per year over half a decade. 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 China Shineway Pharmaceutical Group better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with China Shineway Pharmaceutical Group , and understanding them should be part of your investment process.
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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.