For us, stock picking is in large part the hunt for the truly magnificent stocks. You won't get it right every time, but when you do, the returns can be truly splendid. One bright shining star stock has been Hailiang Education Group Inc. (NASDAQ:HLG), which is 503% higher than three years ago. Also pleasing for shareholders was the 52% gain in the last three months.
We love happy stories like this one. The company should be really proud of that performance!
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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 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 three years of share price growth, Hailiang Education Group achieved compound earnings per share growth of 36% per year. In comparison, the 82% per year gain in the share price outpaces the EPS growth. So it's fair to assume the market has a higher opinion of the business than it did three years ago. It's not unusual to see the market 're-rate' a stock, after a few years of growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It might be well worthwhile taking a look at our free report on Hailiang Education Group's earnings, revenue and cash flow.
A Different Perspective
Hailiang Education Group shareholders are down 38% for the year, but the broader market is up 4.8%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Investors are up over three years, booking 82% per year, much better than the more recent returns. 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. Is Hailiang Education Group cheap compared to other companies? These 3 valuation measures might help you decide.
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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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 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. Thank you for reading.