Some Hypebeast Limited (HKG:150) shareholders are probably rather concerned to see the share price fall 47% over the last three months. But over the last three years the stock has shone bright like a diamond. In fact, the share price has taken off in that time, up 322%. Arguably, the recent fall is to be expected after such a strong rise. The thing to consider is whether there is still too much elation around the company's prospects.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
Hypebeast was able to grow its EPS at 151% per year over three years, sending the share price higher. The average annual share price increase of 62% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of Hypebeast's earnings, revenue and cash flow.
A Different Perspective
Hypebeast shareholders may not have made money over the last year, but their total loss of 13% isn't as bad as the market loss of around 13%. Shareholders who have held for three years might be relatively sanguine about the recent weakness, given they have made 62% per year for three years. Given the three year returns are better than the return over the last year, it might be that the broader market has weighed on the stock recently. It's always interesting to track share price performance over the longer term. But to understand Hypebeast better, we need to consider many other factors. For example, we've discovered 2 warning signs for Hypebeast (1 is concerning!) that you should be aware of before investing here.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK 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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