As every investor would know, not every swing hits the sweet spot. But you want to avoid the really big losses like the plague. So consider, for a moment, the misfortune of Kingston Financial Group Limited (HKG:1031) investors who have held the stock for three years as it declined a whopping 75%. That would certainly shake our confidence in the decision to own the stock. And over the last year the share price fell 65%, so we doubt many shareholders are delighted.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 three years that the share price fell, Kingston Financial Group's earnings per share (EPS) dropped by 16% each year. This reduction in EPS is slower than the 37% annual reduction in the share price. So it seems the market was too confident about the business, in the past.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into Kingston Financial Group's key metrics by checking this interactive graph of Kingston Financial Group's earnings, revenue and cash flow.
A Different Perspective
We regret to report that Kingston Financial Group shareholders are down 64% for the year (even including dividends) . Unfortunately, that's worse than the broader market decline of 18%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 21% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Kingston Financial Group better, we need to consider many other factors. For example, we've discovered 3 warning signs for Kingston Financial Group (1 makes us a bit uncomfortable!) that you should be aware of before investing here.
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.
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.
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