The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the long term shareholders of Shandong Weigao Group Medical Polymer Company Limited (HKG:1066) have had an unfortunate run in the last three years. So they might be feeling emotional about the 62% share price collapse, in that time. The more recent news is of little comfort, with the share price down 61% in a year. The falls have accelerated recently, with the share price down 30% in the last three months.

It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.

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.

Although the share price is down over three years, Shandong Weigao Group Medical Polymer actually managed to grow EPS by 7.2% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.

Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

We note that, in three years, revenue has actually grown at a 7.8% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating Shandong Weigao Group Medical Polymer further; while we may be missing something on this analysis, there might also be an opportunity.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Take a more thorough look at Shandong Weigao Group Medical Polymer's financial health with this free report on its balance sheet.

A Different Perspective

We regret to report that Shandong Weigao Group Medical Polymer shareholders are down 60% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 11%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Shandong Weigao Group Medical Polymer better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Shandong Weigao Group Medical Polymer you should know about.

Of course Shandong Weigao Group Medical Polymer 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 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.