Even the best stock pickers will make plenty of bad investments. And unfortunately for New Century Healthcare Holding Co. Limited (HKG:1518) shareholders, the stock is a lot lower today than it was a year ago. The share price is down a hefty 59% in that time. New Century Healthcare Holding 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 falls have accelerated recently, with the share price down 39% in the last three months.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Unhappily, New Century Healthcare Holding had to report a 45% decline in EPS over the last year. The share price decline of 59% is actually more than the EPS drop. This suggests the EPS fall has made some shareholders are more nervous about the business.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
We doubt New Century Healthcare Holding shareholders are happy with the loss of 59% over twelve months. That falls short of the market, which lost 6.2%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. The share price decline has continued throughout the most recent three months, down 39%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
New Century Healthcare Holding is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
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