While it may not be enough for some shareholders, we think it is good to see the Apeloa Pharmaceutical Co.,Ltd (SZSE:000739) share price up 12% in a single quarter. But that doesn't help the fact that the three year return is less impressive. After all, the share price is down 52% in the last three years, significantly under-performing the market.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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).

Although the share price is down over three years, Apeloa PharmaceuticalLtd actually managed to grow EPS by 4.8% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.

After considering the numbers, we'd posit that the the market had higher expectations of EPS growth, three years back. However, taking a look at other business metrics might shed a bit more light on the share price action.

With a rather small yield of just 1.9% we doubt that the stock's share price is based on its dividend. 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 Apeloa PharmaceuticalLtd 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 Apeloa PharmaceuticalLtd stock, you should check out this FREE detailed 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. In the case of Apeloa PharmaceuticalLtd, it has a TSR of -50% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Apeloa PharmaceuticalLtd shareholders are up 8.3% for the year (even including dividends). Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 6% over half a decade This suggests the company might be improving over time. 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. For instance, we've identified 1 warning sign for Apeloa PharmaceuticalLtd that you should be aware of.

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.