Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. Unfortunately the Nimble Holdings Company Limited (HKG:186) share price slid 16% over twelve months. That's disappointing when you consider the market returned 10.0%. The silver lining (for longer term investors) is that the stock is still 12% higher than it was three years ago. The share price has dropped 39% in 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 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, Nimble Holdings had to report a 69% decline in EPS over the last year. This fall in the EPS is significantly worse than the 16% the share price fall. So despite the weak per-share profits, some investors are probably relieved the situation wasn't more difficult. Indeed, with a P/E ratio of 56.03 there is obviously some real optimism that earnings will bounce back.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It might be well worthwhile taking a look at our free report on Nimble Holdings's earnings, revenue and cash flow.
A Different Perspective
The last twelve months weren't great for Nimble Holdings shares, which cost holders 16%, while the market was up about 10.0%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Fortunately the longer term story is brighter, with total returns averaging about 3.9% per year over three years. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. Before deciding if you like the current share price, check how Nimble Holdings scores on these 3 valuation metrics.
We will like Nimble 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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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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