Most people feel a little frustrated if a stock they own goes down in price. But in the short term the market is a voting machine, and the share price movements may not reflect the underlying business performance. The NanJing Pharmaceutical Company Limited (SHSE:600713) is down 13% over a year, but the total shareholder return is -9.7% once you include the dividend. That's better than the market which declined 14% over the last year. On the bright side, the stock is actually up 0.7% in the last three years. But it's up 9.0% in the last week. The buoyant market could have helped drive the share price pop, since stocks are up 6.7% in the same period.

While the last year has been tough for NanJing Pharmaceutical shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the unfortunate twelve months during which the NanJing Pharmaceutical share price fell, it actually saw its earnings per share (EPS) improve by 2.1%. Of course, the situation might betray previous over-optimism about growth.

By glancing at these numbers, we'd posit that the the market had expectations of much higher growth, last year. But other metrics might shed some light on why the share price is down.

Revenue was pretty flat on last year, which isn't too bad. However, it is certainly possible the market was expecting an uptick in revenue, and that the share price fall reflects that disappointment.

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

Take a more thorough look at NanJing Pharmaceutical's financial health with this free report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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, NanJing Pharmaceutical's TSR for the last 1 year was -9.7%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While it's never nice to take a loss, NanJing Pharmaceutical shareholders can take comfort that , including dividends,their trailing twelve month loss of 9.7% wasn't as bad as the market loss of around 14%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 4% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with NanJing Pharmaceutical (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

But note: NanJing Pharmaceutical may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.