Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. Investors in Sichuan Hebang Biotechnology Corporation Limited (SHSE:603077) have tasted that bitter downside in the last year, as the share price dropped 23%. That's disappointing when you consider the market declined 8.0%. On the bright side, the stock is actually up 9.5% in the last three years. Shareholders have had an even rougher run lately, with the share price down 17% in the last 90 days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
Since Sichuan Hebang Biotechnology has shed CN¥661m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Unhappily, Sichuan Hebang Biotechnology had to report a 71% decline in EPS over the last year. The share price fall of 23% isn't as bad as the reduction in earnings per share. So despite the weak per-share profits, some investors are probably relieved the situation wasn't more difficult.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on Sichuan Hebang Biotechnology's earnings, revenue and cash flow.
A Different Perspective
We regret to report that Sichuan Hebang Biotechnology shareholders are down 21% for the year. Unfortunately, that's worse than the broader market decline of 8.0%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 2%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Sichuan Hebang Biotechnology better, we need to consider many other factors. Even so, be aware that Sichuan Hebang Biotechnology is showing 1 warning sign in our investment analysis , you should know about...
But note: Sichuan Hebang Biotechnology may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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.