The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But if you pick the right stock, you can make a lot more than 100%. For example, the Haidilao International Holding Ltd. (HKG:6862) share price has soared 101% return in just a single year. Meanwhile the share price is 4.9% higher than it was a week ago. Note that businesses generally develop over the long term, so the returns over the last year might not reflect a long term trend.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
During the last year Haidilao International Holding grew its earnings per share (EPS) by 43%. This EPS growth is significantly lower than the 101% increase in the share price. So it's fair to assume the market has a higher opinion of the business than it a year ago. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 87.99.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It is of course excellent to see how Haidilao International Holding has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Haidilao International Holding's financial health with this free report on its balance sheet.
A Different Perspective
It's nice to see that Haidilao International Holding shareholders have gained 102% over the last year , including dividends . That's better than the more recent three month gain of 6.8%, implying that share price has plateaued recently. Having said that, we doubt shareholders would be concerned. It seems the market is simply waiting on more information, because if the business delivers so will the share price (eventually). Is Haidilao International Holding cheap compared to other companies? These 3 valuation measures might help you decide.
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.
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.