Investing in stocks inevitably means buying into some companies that perform poorly. But the last three years have been particularly tough on longer term Luye Pharma Group Ltd. (HKG:2186) shareholders. So they might be feeling emotional about the 52% share price collapse, in that time. And more recent buyers are having a tough time too, with a drop of 27% in the last year. The falls have accelerated recently, with the share price down 25% in the last three months.

With the stock having lost 4.7% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

See our latest analysis for Luye Pharma Group

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Luye Pharma Group became profitable within the last five years. We would usually expect to see the share price rise as a result. So it's worth looking at other metrics to try to understand the share price move.

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 how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

We know that Luye Pharma Group has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling Luye Pharma Group stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

While the broader market lost about 20% in the twelve months, Luye Pharma Group shareholders did even worse, losing 27%. 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 8% 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. 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. For instance, we've identified 1 warning sign for Luye Pharma Group that 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 Hong Kong 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.