In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But even the best stock picker will only win with some selections. So we wouldn't blame long term Renhe Pharmacy Co., Ltd. (SZSE:000650) shareholders for doubting their decision to hold, with the stock down 16% over a half decade. Even worse, it's down 13% in about a month, which isn't fun at all.

After losing 13% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

See our latest analysis for Renhe Pharmacy

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 half decade during which the share price slipped, Renhe Pharmacy actually saw its earnings per share (EPS) improve by 3.6% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.

With EPS gaining and a declining share price, one would suggest the market is cooling on its view of the company. That said, if EPS continues to increase, it seems very likely the share price will get a boost, in the long term.

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

This free interactive report on Renhe Pharmacy's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Renhe Pharmacy the TSR over the last 5 years was -7.0%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Renhe Pharmacy has rewarded shareholders with a total shareholder return of 8.9% in the last twelve months. And that does include the dividend. There's no doubt those recent returns are much better than the TSR loss of 1.4% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Renhe Pharmacy is showing 1 warning sign in our investment analysis , you should know about...

Of course Renhe Pharmacy may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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