Despite lower earnings than three years ago, KPC PharmaceuticalsInc (SHSE:600422) investors are up 60% since then

Simply Wall St · 10/17 22:07

While KPC Pharmaceuticals,Inc. (SHSE:600422) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 21% in the last quarter. But over three years, the returns would have left most investors smiling After all, the share price is up a market-beating 53% in that time.

While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

See our latest analysis for KPC PharmaceuticalsInc

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 three years of share price growth, KPC PharmaceuticalsInc actually saw its earnings per share (EPS) drop 7.2% per year.

So we doubt that the market is looking to EPS for its main judge of the company's value. Therefore, we think it's worth considering other metrics as well.

Languishing at just 1.5%, we doubt the dividend is doing much to prop up the share price. The revenue drop of 4.3% is as underwhelming as some politicians. The only thing that's clear is there is low correlation between KPC PharmaceuticalsInc's share price and its historic fundamental data. Further research may be required!

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

earnings-and-revenue-growth
SHSE:600422 Earnings and Revenue Growth October 17th 2024

We know that KPC PharmaceuticalsInc has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on KPC PharmaceuticalsInc

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, KPC PharmaceuticalsInc's TSR for the last 3 years was 60%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Investors in KPC PharmaceuticalsInc had a tough year, with a total loss of 21% (including dividends), against a market gain of about 1.4%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 6% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand KPC PharmaceuticalsInc better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for KPC PharmaceuticalsInc you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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