If you love investing in stocks you're bound to buy some losers. But the long term shareholders of Sino Biopharmaceutical Limited (HKG:1177) have had an unfortunate run in the last three years. Regrettably, they have had to cope with a 62% drop in the share price over that period. And the ride hasn't got any smoother in recent times over the last year, with the price 35% lower in that time. Furthermore, it's down 20% in about a quarter. That's not much fun for holders.

While the stock has risen 4.7% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

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. 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.

During the three years that the share price fell, Sino Biopharmaceutical's earnings per share (EPS) dropped by 9.1% each year. The share price decline of 27% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of Sino Biopharmaceutical's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Sino Biopharmaceutical's TSR for the last 3 years was -59%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market lost about 16% in the twelve months, Sino Biopharmaceutical shareholders did even worse, losing 34% (even including dividends). 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 6% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Sino Biopharmaceutical better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Sino Biopharmaceutical .

Sino Biopharmaceutical is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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.