If you want to compound wealth in the stock market, you can do so by buying an index fund. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Harbin Pharmaceutical Group Co., Ltd. (SHSE:600664) share price is up 20% in the last 1 year, clearly besting the market decline of around 6.4% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! On the other hand, longer term shareholders have had a tougher run, with the stock falling 2.1% in three years.
Although Harbin Pharmaceutical Group has shed CN¥555m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
View our latest analysis for Harbin Pharmaceutical Group
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).
Harbin Pharmaceutical Group was able to grow EPS by 240% in the last twelve months. It's fair to say that the share price gain of 20% did not keep pace with the EPS growth. Therefore, it seems the market isn't as excited about Harbin Pharmaceutical Group as it was before. This could be an opportunity.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into Harbin Pharmaceutical Group's key metrics by checking this interactive graph of Harbin Pharmaceutical Group's earnings, revenue and cash flow.
A Different Perspective
It's good to see that Harbin Pharmaceutical Group has rewarded shareholders with a total shareholder return of 20% in the last twelve months. Notably the five-year annualised TSR loss of 1.0% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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. Case in point: We've spotted 1 warning sign for Harbin Pharmaceutical Group you should be aware of.
But note: Harbin Pharmaceutical Group 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.