While WuXi Biologics (Cayman) Inc. (HKG:2269) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 29% in the last quarter. But that doesn't change the fact that shareholders have received really good returns over the last five years. In fact, the share price is 290% higher today. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Of course, that doesn't necessarily mean it's cheap now. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 59% decline over the last twelve months.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

View our latest analysis for WuXi Biologics (Cayman)

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 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 five years of share price growth, WuXi Biologics (Cayman) achieved compound earnings per share (EPS) growth of 80% per year. The EPS growth is more impressive than the yearly share price gain of 31% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of WuXi Biologics (Cayman)'s earnings, revenue and cash flow.

A Different Perspective

We regret to report that WuXi Biologics (Cayman) shareholders are down 59% for the year. Unfortunately, that's worse than the broader market decline of 21%. 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. On the bright side, long term shareholders have made money, with a gain of 31% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with WuXi Biologics (Cayman) , and understanding them should be part of your investment process.

WuXi Biologics (Cayman) is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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