Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Unfortunately the Tokyo Chuo Auction Holdings Limited (HKG:1939) share price slid 46% over twelve months. That falls noticeably short of the market return of around 4.2%. Because Tokyo Chuo Auction Holdings hasn't been listed for many years, the market is still learning about how the business performs. The falls have accelerated recently, with the share price down 21% 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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Unfortunately Tokyo Chuo Auction Holdings reported an EPS drop of 83% for the last year. This fall in the EPS is significantly worse than the 46% the share price fall. It may have been that the weak EPS was not as bad as some had feared.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on Tokyo Chuo Auction Holdings's earnings, revenue and cash flow.
A Different Perspective
Given that the market gained 4.2% in the last year, Tokyo Chuo Auction Holdings shareholders might be miffed that they lost 45% (even including dividends) . However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 21% 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 deciding if you like the current share price, check how Tokyo Chuo Auction Holdings scores on these 3 valuation metrics.
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.
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.