For many, the main point of investing is to generate higher returns than the overall market. But in any portfolio, there will be mixed results between individual stocks. So we wouldn't blame long term China Traditional Chinese Medicine Holdings Co. Limited (HKG:570) shareholders for doubting their decision to hold, with the stock down 42% over a half decade. Even worse, it's down 21% in about a month, which isn't fun at all.

While the stock has risen 8.0% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

See our latest analysis for China Traditional Chinese Medicine Holdings

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

Looking back five years, both China Traditional Chinese Medicine Holdings' share price and EPS declined; the latter at a rate of 8.9% per year. This change in EPS is reasonably close to the 10% average annual decrease in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. So it's fair to say the share price has been responding to changes in EPS.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of China Traditional Chinese Medicine Holdings' earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of China Traditional Chinese Medicine Holdings, it has a TSR of -37% for the last 5 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

China Traditional Chinese Medicine Holdings shareholders are down 18% over twelve months (even including dividends), which isn't far from the market return of -17%. So last year was actually even worse than the last five years, which cost shareholders 6% per year. It will probably take a substantial improvement in the fundamental performance for the company to reverse this trend. It's always interesting to track share price performance over the longer term. But to understand China Traditional Chinese Medicine Holdings better, we need to consider many other factors. Even so, be aware that China Traditional Chinese Medicine Holdings is showing 1 warning sign in our investment analysis , you should know about...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong 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.