If you love investing in stocks you're bound to buy some losers. But long term Zhejiang Tianyu Pharmaceutical Co., Ltd. (SZSE:300702) shareholders have had a particularly rough ride in the last three year. Regrettably, they have had to cope with a 65% drop in the share price over that period. The more recent news is of little comfort, with the share price down 38% in a year. Furthermore, it's down 30% in about a quarter. That's not much fun for holders. Of course, this share price action may well have been influenced by the 15% decline in the broader market, throughout the period.

Since Zhejiang Tianyu Pharmaceutical has shed CN¥706m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Over the three years that the share price declined, Zhejiang Tianyu Pharmaceutical'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. However, we can say we'd expect to see a falling share price in this scenario.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

While the broader market lost about 25% in the twelve months, Zhejiang Tianyu Pharmaceutical shareholders did even worse, losing 38%. 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 4%, 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. You could get a better understanding of Zhejiang Tianyu Pharmaceutical's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

We will like Zhejiang Tianyu 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.