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. That downside risk was realized by Hing Ming Holdings Limited (HKG:8425) shareholders over the last year, as the share price declined 23%. That's well bellow the market return of 3.3%. Hing Ming Holdings may have better days ahead, of course; we've only looked at a one year period. It's down 25% in about a quarter.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
Unhappily, Hing Ming Holdings had to report a 54% decline in EPS over the last year. The share price fall of 23% isn't as bad as the reduction in earnings per share. 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 69.35 there is obviously some real optimism that earnings will bounce back.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of Hing Ming Holdings's earnings, revenue and cash flow.
A Different Perspective
Given that the market gained 3.3% in the last year, Hing Ming Holdings shareholders might be miffed that they lost 23%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. It's worth noting that the last three months did the real damage, with a 25% decline. This probably signals that the business has recently disappointed shareholders - it will take time to win them back. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 4 warning signs for Hing Ming Holdings (1 is significant) that you should be aware of.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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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