While it may not be enough for some shareholders, we think it is good to see the Zhejiang Hisoar Pharmaceutical Co., Ltd. (SZSE:002099) share price up 21% 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 23% in the last three years, significantly under-performing the market.

On a more encouraging note the company has added CN¥397m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

Zhejiang Hisoar Pharmaceutical isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally hope to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

Over the last three years, Zhejiang Hisoar Pharmaceutical's revenue dropped 5.8% per year. That's not what investors generally want to see. The annual decline of 7% per year in that period has clearly disappointed holders. That makes sense given the lack of either profits or revenue growth. However, in this kind of situation you can sometimes find opportunity, where sentiment is negative but the company is actually making good progress.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

Investors in Zhejiang Hisoar Pharmaceutical had a tough year, with a total loss of 11%, against a market gain of about 8.8%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.0% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Case in point: We've spotted 1 warning sign for Zhejiang Hisoar Pharmaceutical you should be aware of.

We will like Zhejiang Hisoar Pharmaceutical 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.