It's not a secret that every investor will make bad investments, from time to time. But it should be a priority to avoid stomach churning catastrophes, wherever possible. So spare a thought for the long term shareholders of Hexindai Inc. (NASDAQ:HX); the share price is down a whopping 78% in the last twelve months. That'd be a striking reminder about the importance of diversification. Hexindai hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. Even worse, it's down 28% in about a month, which isn't fun at all.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
Unhappily, Hexindai had to report a 92% decline in EPS over the last year. We note that the 78% share price drop is very close to the EPS drop. Given the lower EPS we might have expected investors to lose confidence in the stock, but that doesn't seemed to have happened. Instead, the change in the share price seems to reduction in earnings per share, alone.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It might be well worthwhile taking a look at our free report on Hexindai's earnings, revenue and cash flow.
A Different Perspective
Given that the market gained 4.4% in the last year, Hexindai shareholders might be miffed that they lost 78%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. The share price decline has continued throughout the most recent three months, down 26%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. Is Hexindai cheap compared to other companies? These 3 valuation measures might help you decide.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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