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Volatility 101: Should WINDMILL Group (HKG:1850) Shares Have Dropped 18%?

Simply Wall St

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. Investors in WINDMILL Group Limited (HKG:1850) have tasted that bitter downside in the last year, as the share price dropped 18%. That falls noticeably short of the market return of around 8.7%. WINDMILL Group hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. The share price has dropped 29% in three months.

Check out our latest analysis for WINDMILL Group

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Unhappily, WINDMILL Group had to report a 21% decline in EPS over the last year. We note that the 18% share price drop is very close to the EPS drop. Therefore one could posit that the market has not become more concerned about the company, despite the lower EPS. Instead, the change in the share price seems to reduction in earnings per share, alone.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

SEHK:1850 Past and Future Earnings, October 29th 2019

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of WINDMILL Group's earnings, revenue and cash flow.

A Different Perspective

While WINDMILL Group shareholders are down 18% for the year, the market itself is up 8.7%. 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. It's worth noting that the last three months did the real damage, with a 29% decline. This probably signals that the business has recently disappointed shareholders - it will take time to win them back. Before forming an opinion on WINDMILL Group you might want to consider these 3 valuation metrics.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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. Thank you for reading.