The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on a lighter note, a good company can see its share price rise well over 100%. For instance, the price of Zhejiang Jolly Pharmaceutical Co.,LTD (SZSE:300181) stock is up an impressive 165% over the last five years. In the last week shares have slid back 3.7%.

While the stock has fallen 3.7% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Over half a decade, Zhejiang Jolly PharmaceuticalLTD managed to grow its earnings per share at 75% a year. The EPS growth is more impressive than the yearly share price gain of 22% over the same period. So it seems the market isn't so enthusiastic about the stock these days.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Zhejiang Jolly PharmaceuticalLTD has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Zhejiang Jolly PharmaceuticalLTD's financial health with this free report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Zhejiang Jolly PharmaceuticalLTD's TSR for the last 5 years was 191%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Zhejiang Jolly PharmaceuticalLTD has rewarded shareholders with a total shareholder return of 31% in the last twelve months. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 24% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Zhejiang Jolly PharmaceuticalLTD , and understanding them should be part of your investment process.

Of course Zhejiang Jolly 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.

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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.

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