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For many, the main point of investing is to generate higher returns than the overall market. But the main game is to find enough winners to more than offset the losers So we wouldn’t blame long term China Shineway Pharmaceutical Group Limited (HKG:2877) shareholders for doubting their decision to hold, with the stock down 39% over a half decade. We also note that the stock has performed poorly over the last year, with the share price down 28%. Shareholders have had an even rougher run lately, with the share price down 16% in the last 90 days.
See our latest analysis for China Shineway Pharmaceutical Group
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the five years over which the share price declined, China Shineway Pharmaceutical Group’s earnings per share (EPS) dropped by 4.9% each year. This reduction in EPS is less than the 9.4% annual reduction in the share price. So it seems the market was too confident about the business, in the past. The less favorable sentiment is reflected in its current P/E ratio of 10.98.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of China Shineway Pharmaceutical Group, it has a TSR of -27% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
We regret to report that China Shineway Pharmaceutical Group shareholders are down 26% for the year (even including dividends). Unfortunately, that’s worse than the broader market decline of 5.1%. 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. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 6.0% over the last half decade. We realise that Buffett 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 businesses. Before forming an opinion on China Shineway Pharmaceutical Group you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.