It's easy to match the overall market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by Guizhou Bailing Group Pharmaceutical Co., Ltd. (SZSE:002424) shareholders over the last year, as the share price declined 25%. That falls noticeably short of the market decline of around 8.8%. However, the longer term returns haven't been so bad, with the stock down 1.3% in the last three years.

On a more encouraging note the company has added CN¥568m to its market cap in just the last 7 days, so let's see if we can determine what's driven the one-year loss for shareholders.

View our latest analysis for Guizhou Bailing Group Pharmaceutical

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).

Even though the Guizhou Bailing Group Pharmaceutical share price is down over the year, its EPS actually improved. It could be that the share price was previously over-hyped.

The divergence between the EPS and the share price is quite notable, during the year. So it's well worth checking out some other metrics, too.

Guizhou Bailing Group Pharmaceutical's revenue is actually up 32% over the last year. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We know that Guizhou Bailing Group Pharmaceutical has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Guizhou Bailing Group Pharmaceutical in this interactive graph of future profit estimates.

A Different Perspective

We regret to report that Guizhou Bailing Group Pharmaceutical shareholders are down 25% for the year. Unfortunately, that's worse than the broader market decline of 8.8%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.4% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Before deciding if you like the current share price, check how Guizhou Bailing Group Pharmaceutical scores on these 3 valuation metrics.

We will like Guizhou Bailing Group Pharmaceutical better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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.