We're definitely into long term investing, but some companies are simply bad investments over any time frame. It hits us in the gut when we see fellow investors suffer a loss. Anyone who held Hilong Holding Limited (HKG:1623) for five years would be nursing their metaphorical wounds since the share price dropped 76% in that time. And we doubt long term believers are the only worried holders, since the stock price has declined 23% over the last twelve months. Unhappily, the share price slid 1.2% in the last week.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
During the five years over which the share price declined, Hilong Holding's earnings per share (EPS) dropped by 12% each year. This reduction in EPS is less than the 25% annual reduction in the share price. This implies that the market was previously too optimistic about the stock. The less favorable sentiment is reflected in its current P/E ratio of 5.80.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that Hilong Holding has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.
A Different Perspective
We regret to report that Hilong Holding shareholders are down 23% for the year (even including dividends) . Unfortunately, that's worse than the broader market decline of 6.9%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. However, the loss over the last year isn't as bad as the 24% per annum loss investors have suffered over the last half decade. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. Before deciding if you like the current share price, check how Hilong Holding scores on these 3 valuation metrics.
Of course Hilong Holding may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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 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. Thank you for reading.