It's nice to see the Zhejiang Starry Pharmaceutical Co.,Ltd. (SHSE:603520) share price up 13% in a week. But only the myopic could ignore the astounding decline over three years. In that time the share price has melted like a snowball in the desert, down 78%. So it sure is nice to see a bit of an improvement. The thing to think about is whether the business has really turned around.

The recent uptick of 13% could be a positive sign of things to come, so let's take a look at historical fundamentals.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Over the three years that the share price declined, Zhejiang Starry PharmaceuticalLtd's earnings per share (EPS) dropped significantly, falling to a loss. Extraordinary items contributed to this situation. Due to the loss, it's not easy to use EPS as a reliable guide to the business. But it's safe to say we'd generally expect the share price to be lower as a result!

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It might be well worthwhile taking a look at our free report on Zhejiang Starry PharmaceuticalLtd's earnings, revenue and cash flow.

A Different Perspective

While the broader market lost about 17% in the twelve months, Zhejiang Starry PharmaceuticalLtd shareholders did even worse, losing 50% (even including dividends). 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. Longer term investors wouldn't be so upset, since they would have made 0.6%, each year, over five years. 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. Take risks, for example - Zhejiang Starry PharmaceuticalLtd has 2 warning signs we think you should be aware of.

Of course Zhejiang Starry PharmaceuticalLtd 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.