It's easy to match the overall market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Investors in Bright Scholar Education Holdings Limited (NYSE:BEDU) have tasted that bitter downside in the last year, as the share price dropped 13%. That's disappointing when you consider the market returned 17%. Bright Scholar Education Holdings hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. The good news is that the stock is up 2.1% in the last week.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Unhappily, Bright Scholar Education Holdings had to report a 2.6% decline in EPS over the last year. The share price decline of 13% is actually more than the EPS drop. So it seems the market was too confident about the business, a year ago.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It is of course excellent to see how Bright Scholar Education Holdings has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Bright Scholar Education Holdings stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Given that the market gained 17% in the last year, Bright Scholar Education Holdings shareholders might be miffed that they lost 13% (even including dividends) . However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Putting aside the last twelve months, it's good to see the share price has rebounded by 4.8%, in the last ninety days. Let's just hope this isn't the widely-feared 'dead cat bounce' (which would indicate further declines to come). Is Bright Scholar Education Holdings cheap compared to other companies? These 3 valuation measures might help you decide.
But note: Bright Scholar Education Holdings 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 US exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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