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 Miji International Holdings Limited (HKG:1715) share price slid 34% over twelve months. That falls noticeably short of the market return of around -17%. Miji International Holdings 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 silver lining is that the stock is up 2.0% in about a week.
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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Unhappily, Miji International Holdings had to report a 28% decline in EPS over the last year. This proportional reduction in earnings per share isn't far from the 34% decrease in the share price. Given the lower EPS we might have expected investors to lose confidence in the stock, but that doesn't seemed to have happened. Instead, the change in the share price seems to reduction in earnings per share, alone.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on Miji International Holdings's earnings, revenue and cash flow.
A Different Perspective
We doubt Miji International Holdings shareholders are happy with the loss of 34% over twelve months. That falls short of the market, which lost 17%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. The share price decline has continued throughout the most recent three months, down 8.9%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Miji International Holdings is showing 2 warning signs in our investment analysis , you should know about...
Miji International Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with 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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