If you love investing in stocks you're bound to buy some losers. But long term Chengdu Kanghong Pharmaceutical Group Co., Ltd (SZSE:002773) shareholders have had a particularly rough ride in the last three year. So they might be feeling emotional about the 62% share price collapse, in that time. Furthermore, it's down 14% in about a quarter. That's not much fun for holders. Of course, this share price action may well have been influenced by the 6.0% decline in the broader market, throughout the period.

Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

View our latest analysis for Chengdu Kanghong Pharmaceutical Group

There is no denying that markets are sometimes efficient, but prices do not always reflect 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.

Although the share price is down over three years, Chengdu Kanghong Pharmaceutical Group actually managed to grow EPS by 5.8% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.

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.

The modest 0.9% dividend yield is unlikely to be guiding the market view of the stock. The company has kept revenue pretty healthy over the last three years, so we doubt that explains the falling share price. There doesn't seem to be any clear correlation between the fundamental business metrics and the share price. That could mean that the stock was previously overrated, or it could spell opportunity now.

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

We know that Chengdu Kanghong Pharmaceutical Group has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on Chengdu Kanghong Pharmaceutical Group

A Different Perspective

Chengdu Kanghong Pharmaceutical Group shareholders are down 6.3% for the year (even including dividends), but the market itself is up 0.02%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, longer term shareholders are suffering worse, given the loss of 7% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. 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. Case in point: We've spotted 1 warning sign for Chengdu Kanghong Pharmaceutical Group you should be aware of.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.