Shanxi Zhendong Pharmaceutical Co.,Ltd (SZSE:300158) shareholders should be happy to see the share price up 22% in the last quarter. It's not great that the stock is down over the last three years. But that's not so bad when you consider its market is down 16%.

If the past week is anything to go by, investor sentiment for Shanxi Zhendong PharmaceuticalLtd isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

Because Shanxi Zhendong PharmaceuticalLtd made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last three years Shanxi Zhendong PharmaceuticalLtd saw its revenue shrink by 17% per year. That means its revenue trend is very weak compared to other loss making companies. On the face of it we'd posit the share price fall of 9% compound, over three years is well justified by the fundamental deterioration. The key question now is whether the company has the capacity to fund itself to profitability, without more cash. The company will need to return to revenue growth as quickly as possible, if it wants to see some enthusiasm from investors.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

This free interactive report on Shanxi Zhendong PharmaceuticalLtd's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Shanxi Zhendong PharmaceuticalLtd's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for Shanxi Zhendong PharmaceuticalLtd shareholders, and that cash payout explains why its total shareholder loss of 8.5%, over the last 3 years, isn't as bad as the share price return.

A Different Perspective

Investors in Shanxi Zhendong PharmaceuticalLtd had a tough year, with a total loss of 24%, against a market gain of about 4.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 7%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Shanxi Zhendong PharmaceuticalLtd better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Shanxi Zhendong PharmaceuticalLtd , and understanding them should be part of your investment process.

We will like Shanxi Zhendong PharmaceuticalLtd better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider 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.