It's easy to match the overall 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. That downside risk was realized by REM Group (Holdings) Limited (HKG:1750) shareholders over the last year, as the share price declined 47%. That's disappointing when you consider the market returned 9.2%. REM Group (Holdings) may have better days ahead, of course; we've only looked at a one year period. Furthermore, it's down 17% in about a quarter. That's not much fun for holders.
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).
Even though the REM Group (Holdings) share price is down over the year, its EPS actually improved. Of course, the situation might betray previous over-optimism about growth.
By glancing at these numbers, we'd posit that the the market had expectations of much higher growth, last year. But looking to other metrics might better explain the share price change.
REM Group (Holdings)'s revenue is actually up 8.8% 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 that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free interactive report on REM Group (Holdings)'s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
Given that the market gained 9.2% in the last year, REM Group (Holdings) shareholders might be miffed that they lost 47%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 17% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. Before deciding if you like the current share price, check how REM Group (Holdings) scores on these 3 valuation metrics.
Of course REM Group (Holdings) 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 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.