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Investors can approximate the average market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Investors in Virscend Education Company Limited (HKG:1565) have tasted that bitter downside in the last year, as the share price dropped 45%. That falls noticeably short of the market return of around -1.1%. We note that it has not been easy for shareholders over three years, either; the share price is down 42% in that time. The falls have accelerated recently, with the share price down 20% in the last three months. But this could be related to the weak market, which is down 8.3% in the same period.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the unfortunate twelve months during which the Virscend Education share price fell, it actually saw its earnings per share (EPS) improve by 16%. It could be that the share price was previously over-hyped. It's fair to say that the share price does not seem to be reflecting the EPS growth. So it's well worth checking out some other metrics, too.
Given the yield is quite low, at 1.4%, we doubt the dividend can shed much light on the share price. Virscend Education's revenue is actually up 23% over the last year. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. You can see what analysts are predicting for Virscend Education in this interactive graph of future profit estimates.
What about the Total Shareholder Return (TSR)?
We've already covered Virscend Education's share price action, but we should also mention its total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Dividends have been really beneficial for Virscend Education shareholders, and that cash payout explains why its total shareholder loss of 44%, over the last year, isn't as bad as the share price return.
A Different Perspective
The last twelve months weren't great for Virscend Education shares, which performed worse than the market, costing holders 44%, including dividends. The market shed around 1.1%, no doubt weighing on the stock price. The three-year loss of 16% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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.