By buying an index fund, you can roughly match the market return with ease. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, the YiChang HEC ChangJiang Pharmaceutical Co., Ltd. (HKG:1558) share price is up 74% in the last three years, clearly besting the market decline of around 0.9% (not including dividends).

Since the long term performance has been good but there's been a recent pullback of 4.5%, let's check if the fundamentals match the share price.

View our latest analysis for YiChang HEC ChangJiang Pharmaceutical

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 three years of share price growth, YiChang HEC ChangJiang Pharmaceutical moved from a loss to profitability. That would generally be considered a positive, so we'd expect the share price to be up.

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

We know that YiChang HEC ChangJiang Pharmaceutical has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling YiChang HEC ChangJiang Pharmaceutical stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

YiChang HEC ChangJiang Pharmaceutical shareholders are down 13% for the year, but the market itself is up 32%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 10% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. 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. Take risks, for example - YiChang HEC ChangJiang Pharmaceutical has 2 warning signs we think you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.