In order to justify the effort of selecting individual stocks, it’s worth striving to beat the returns from a market index fund. But even the best stock picker will only win with some selections. So we wouldn’t blame long term Hi Sun Technology (China) Limited (HKG:818) shareholders for doubting their decision to hold, with the stock down 47% over a half decade. Shareholders have had an even rougher run lately, with the share price down 16% in the last 90 days.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. 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.
During the unfortunate half decade during which the share price slipped, Hi Sun Technology (China) actually saw its earnings per share (EPS) improve by 73% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.
Due to the lack of correlation between the EPS growth and the falling share price, it’s worth taking a look at other metrics to try to understand the share price movement.
Revenue is actually up 31% over the time period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We know that Hi Sun Technology (China) has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling Hi Sun Technology (China) stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
Although it hurts that Hi Sun Technology (China) returned a loss of 1.8% in the last twelve months, the broader market was actually worse, returning a loss of 3.1%. Of far more concern is the 12% p.a. loss served to shareholders over the last five years. While the losses are slowing we doubt many shareholders are happy with the stock. Before deciding if you like the current share price, check how Hi Sun Technology (China) scores on these 3 valuation metrics.
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 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.
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. Thank you for reading.