Did Changing Sentiment Drive China Pioneer Pharma Holdings's (HKG:1345) Share Price Down A Painful 86%?

Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!

Some stocks are best avoided. We really hate to see fellow investors lose their hard-earned money. For example, we sympathize with anyone who was caught holding China Pioneer Pharma Holdings Limited (HKG:1345) during the five years that saw its share price drop a whopping 86%. And we doubt long term believers are the only worried holders, since the stock price has declined 72% over the last twelve months. Furthermore, it's down 32% in about a quarter. That's not much fun for holders.

We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

See our latest analysis for China Pioneer Pharma Holdings

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the five years over which the share price declined, China Pioneer Pharma Holdings's earnings per share (EPS) dropped by 22% each year. This reduction in EPS is less than the 33% annual reduction in the share price. So it seems the market was too confident about the business, in the past. The low P/E ratio of 8.84 further reflects this reticence.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

This free interactive report on China Pioneer Pharma Holdings's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Dividend Lost

The share price return figures discussed above don't include the value of dividends paid previously, but the total shareholder return (TSR) does. By accounting for the value of dividends paid, the TSR can be seen as a more complete measure of the value a company brings to its shareholders. Over the last 5 years, China Pioneer Pharma Holdings generated a TSR of -84%, which is, of course, better than the share price return. Although the company had to cut dividends, it has paid cash to shareholders in the past.

A Different Perspective

While the broader market lost about 1.1% in the twelve months, China Pioneer Pharma Holdings shareholders did even worse, losing 72%. 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 30% per year over five years. 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 deciding if you like the current share price, check how China Pioneer Pharma Holdings scores on these 3 valuation metrics.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.