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This week we saw the Secoo Holding Limited (NASDAQ:SECO) share price climb by 11%. But that doesn't change the fact that the returns over the last year have been disappointing. Specifically, the stock price slipped by 60% in that time. The share price recovery is not so impressive when you consider the fall. It may be that the fall was an overreaction.
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...' 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, Secoo Holding had to report a 30% decline in EPS over the last year. This reduction in EPS is not as bad as the 60% share price fall. This suggests the EPS fall has made some shareholders are more nervous about the business. The less favorable sentiment is reflected in its current P/E ratio of 10.30.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on Secoo Holding's earnings, revenue and cash flow.
A Different Perspective
Given that the market gained 25% in the last year, Secoo Holding shareholders might be miffed that they lost 60%. 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 2.3%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 4 warning signs for Secoo Holding (1 is a bit concerning!) that you should be aware of before investing here.
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 US exchanges.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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