It's easy to match the overall market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. For example, the Milestone Builder Holdings Limited (HKG:1667) share price is down 27% in the last year. That's well bellow the market return of 4.4%. We wouldn't rush to judgement on Milestone Builder Holdings because we don't have a long term history to look at. Furthermore, it's down 24% in about a quarter. That's not much fun for holders.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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, Milestone Builder Holdings had to report a 6.3% decline in EPS over the last year. The share price decline of 27% is actually more than the EPS drop. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock. The P/E ratio of 9.93 also points to the negative market sentiment.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
While Milestone Builder Holdings shareholders are down 27% for the year, the market itself is up 4.4%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. With the stock down 24% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. Before forming an opinion on Milestone Builder Holdings you might want to consider these 3 valuation metrics.
We will like Milestone Builder Holdings better if we see some big insider buys. While we wait, check out this free list of growing companies 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 HK exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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. Thank you for reading.