This week we saw the Tianda Pharmaceuticals Limited (HKG:455) share price climb by 11%. But that doesn't change the reality of under-performance over the last twelve months. The cold reality is that the stock has dropped 31% in one year, under-performing the market.

The recent uptick of 11% could be a positive sign of things to come, so let's take a look at historical fundamentals.

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Tianda Pharmaceuticals wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually desire strong 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.

Tianda Pharmaceuticals' revenue didn't grow at all in the last year. In fact, it fell 29%. That looks pretty grim, at a glance. The stock price has languished lately, falling 31% in a year. That seems pretty reasonable given the lack of both profits and revenue growth. We think most holders must believe revenue growth will improve, or else costs will decline.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on Tianda Pharmaceuticals' earnings, revenue and cash flow.

A Different Perspective

While the broader market gained around 40% in the last year, Tianda Pharmaceuticals shareholders lost 29% (even including dividends). 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 5% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Tianda Pharmaceuticals (at least 1 which can't be ignored) , and understanding them should be part of your investment process.

We will like Tianda Pharmaceuticals 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 Hong Kong exchanges.

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