China Education Group Holdings Limited (HKG:839) shareholders have seen the share price descend 17% over the month. But looking back over the last year, the returns have actually been rather pleasing! To wit, it had solidly beat the market, up 24%.
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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Over the last twelve months, China Education Group Holdings actually shrank its EPS by 1.5%. We don't think that the decline in earnings per share is a good measure of the business over the last twelve months. It makes sense to check some of the other fundamental data for an explanation of the share price rise.
We are skeptical of the suggestion that the 0.7% dividend yield would entice buyers to the stock. However the year on year revenue growth of 59% would help. We do see some companies suppress earnings in order to accelerate revenue growth.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free report showing analyst forecasts should help you form a view on China Education Group Holdings
A Different Perspective
China Education Group Holdings shareholders should be happy with the total gain of 25% over the last twelve months, including dividends. We regret to report that the share price is down 12% over ninety days. It may simply be that the share price got ahead of itself, although there may have been fundamental developments that are weighing on it. Before deciding if you like the current share price, check how China Education Group Holdings scores on these 3 valuation metrics.
We will like China Education Group 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.
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