The simplest way to benefit from a rising market is to buy an index fund. But if you buy individual stocks, you can do both better or worse than that. Unfortunately the Tak Lee Machinery Holdings Limited (HKG:8142) share price slid 18% over twelve months. That contrasts poorly with the market return of -2.7%. Tak Lee Machinery Holdings hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. On top of that, the share price is down 12% in the last week.
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Unfortunately Tak Lee Machinery Holdings reported an EPS drop of 5.3% for the last year. This reduction in EPS is not as bad as the 18% share price fall. So it seems the market was too confident about the business, a year ago. The P/E ratio of 5.63 also points to the negative market sentiment.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into Tak Lee Machinery Holdings's key metrics by checking this interactive graph of Tak Lee Machinery Holdings's earnings, revenue and cash flow.
A Different Perspective
We doubt Tak Lee Machinery Holdings shareholders are happy with the loss of 17% over twelve months (even including dividends). That falls short of the market, which lost 2.7%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. The share price decline has continued throughout the most recent three months, down 1.6%, 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. Importantly, we haven't analysed Tak Lee Machinery Holdings's dividend history. This free visual report on its dividends is a must-read if you're thinking of buying.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
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