While not a mind-blowing move, it is good to see that the Guizhou Xinbang Pharmaceutical Co., Ltd. (SZSE:002390) share price has gained 14% in the last three months. But that doesn't change the fact that the returns over the last three years have been less than pleasing. In fact, the share price is down 46% in the last three years, falling well short of the market return.

The recent uptick of 7.7% could be a positive sign of things to come, so let's take a look at historical fundamentals.

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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).

Guizhou Xinbang Pharmaceutical saw its EPS decline at a compound rate of 11% per year, over the last three years. The share price decline of 19% 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 company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Dive deeper into Guizhou Xinbang Pharmaceutical's key metrics by checking this interactive graph of Guizhou Xinbang Pharmaceutical's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Guizhou Xinbang Pharmaceutical, it has a TSR of -44% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

While the broader market gained around 7.4% in the last year, Guizhou Xinbang Pharmaceutical shareholders lost 23% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. 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. 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 risks, for instance. Every company has them, and we've spotted 1 warning sign for Guizhou Xinbang Pharmaceutical you should know about.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.