If you love investing in stocks you're bound to buy some losers. But long term Zhejiang Jiuzhou Pharmaceutical Co., Ltd (SHSE:603456) shareholders have had a particularly rough ride in the last three year. Regrettably, they have had to cope with a 69% drop in the share price over that period. And more recent buyers are having a tough time too, with a drop of 52% in the last year. Furthermore, it's down 16% in about a quarter. That's not much fun for holders. But this could be related to the weak market, which is down 11% in the same period.

Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.

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 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).

During the unfortunate three years of share price decline, Zhejiang Jiuzhou Pharmaceutical actually saw its earnings per share (EPS) improve by 15% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or else the company was over-hyped in the past, and so its growth has disappointed.

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.

Revenue is actually up 12% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating Zhejiang Jiuzhou Pharmaceutical further; while we may be missing something on this analysis, there might also be an opportunity.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

If you are thinking of buying or selling Zhejiang Jiuzhou Pharmaceutical stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

We regret to report that Zhejiang Jiuzhou Pharmaceutical shareholders are down 51% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 17%. 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 0.6%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Even so, be aware that Zhejiang Jiuzhou Pharmaceutical is showing 1 warning sign in our investment analysis , you should know about...

We will like Zhejiang Jiuzhou Pharmaceutical better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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.