This week we saw the Qianjiang Yongan Pharmaceutical Co., Ltd. (SZSE:002365) share price climb by 19%. But that doesn't change the fact that the returns over the last five years have been less than pleasing. In fact, the share price is down 26%, which falls well short of the return you could get by buying an index fund.
While the last five years has been tough for Qianjiang Yongan Pharmaceutical shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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).
Looking back five years, both Qianjiang Yongan Pharmaceutical's share price and EPS declined; the latter at a rate of 60% per year. The impact of extraordinary items helps explain this. The share price decline of 6% per year isn't as bad as the EPS decline. The relatively muted share price reaction might be because the market expects the business to turn around. With a P/E ratio of 1.75k, it's fair to say the market sees a brighter future for the business.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It might be well worthwhile taking a look at our free report on Qianjiang Yongan Pharmaceutical's earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. We note that for Qianjiang Yongan Pharmaceutical the TSR over the last 5 years was -22%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
While the broader market lost about 11% in the twelve months, Qianjiang Yongan Pharmaceutical shareholders did even worse, losing 17% (even including dividends). 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4% per year over five years. 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 Qianjiang Yongan Pharmaceutical better, we need to consider many other factors. Take risks, for example - Qianjiang Yongan Pharmaceutical has 4 warning signs (and 1 which shouldn't be ignored) we think you should know about.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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.