If you love investing in stocks you're bound to buy some losers. But long term Betta Pharmaceuticals Co., Ltd. (SZSE:300558) shareholders have had a particularly rough ride in the last three year. So they might be feeling emotional about the 67% share price collapse, in that time. And over the last year the share price fell 47%, so we doubt many shareholders are delighted. The falls have accelerated recently, with the share price down 14% in the last three months.

Since Betta Pharmaceuticals has shed CN¥988m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

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

Betta Pharmaceuticals saw its EPS decline at a compound rate of 15% per year, over the last three years. The share price decline of 31% 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 image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Betta Pharmaceuticals has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

A Different Perspective

We regret to report that Betta Pharmaceuticals shareholders are down 47% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 9.1%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.6% per year over five years. 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. Take risks, for example - Betta Pharmaceuticals has 1 warning sign we think you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.