The art and science of stock market investing requires a tolerance for losing money on some of the shares you buy. But it's not unreasonable to try to avoid truly shocking capital losses. We wouldn't blame Jiayuan International Group Limited (HKG:2768) shareholders if they were still in shock after the stock dropped like a lead balloon, down 79% in just one year. That'd be enough to make even the strongest stomachs churn. However, the longer term returns haven't been so bad, with the stock down 12% in the last three years. Unhappily, the share price slid 2.0% in the last week.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
Unhappily, Jiayuan International Group had to report a 1.9% decline in EPS over the last year. This reduction in EPS is not as bad as the 79% share price fall. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock. The less favorable sentiment is reflected in its current P/E ratio of 3.54.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Jiayuan International Group's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for Jiayuan International Group shareholders, and that cash payout explains why its total shareholder loss of 78%, over the last year, isn't as bad as the share price return.
A Different Perspective
The last twelve months weren't great for Jiayuan International Group shares, which performed worse than the market, costing holders 78%. Meanwhile, the broader market slid about 2.4%, likely weighing on the stock. The three-year loss of 2.5% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Warren Buffett famously said he likes to 'buy when there is blood on the streets', he also focusses on high quality stocks with solid prospects. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Jiayuan International Group by clicking this link.
Jiayuan International Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
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 email@example.com. 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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