Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in ASA International Group PLC (LON:ASAI) have tasted that bitter downside in the last year, as the share price dropped 24%. That falls noticeably short of the market return of around -1.7%. We wouldn’t rush to judgement on ASA International Group because we don’t have a long term history to look at. Contrary to the longer term story, the last month has been good for stockholders, with a share price gain of 8.8%.
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).
Unfortunately ASA International Group reported an EPS drop of 97% for the last year. The share price fall of 24% isn’t as bad as the reduction in earnings per share. So despite the weak per-share profits, some investors are probably relieved the situation wasn’t more difficult.
It might be well worthwhile taking a look at our free report on ASA International Group’s earnings, revenue and cash flow.
A Different Perspective
ASA International Group shareholders are down 23% for the year (even including dividends), even worse than the market loss of 1.7%. There’s no doubt that’s a disappointment, but the stock may well have fared better in a stronger market. With the stock down 3.8% over the last three months, the market doesn’t seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. Before forming an opinion on ASA International Group you might want to consider these 3 valuation metrics.
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 GB 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 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. Thank you for reading.