Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Investors in Top Education Group Ltd (HKG:1752) have tasted that bitter downside in the last year, as the share price dropped 13%. That’s disappointing when you consider the market returned 4.5%. Top Education 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 silver lining is that the stock is up 1.7% in about a week.
See our latest analysis for Top Education Group
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).
During the unfortunate twelve months during which the Top Education Group share price fell, it actually saw its earnings per share (EPS) improve by 58%. It could be that the share price was previously over-hyped.
The divergence between the EPS and the share price is quite notable, during the year. But we might find some different metrics explain the share price movements better.
With a low yield of 1.4% we doubt that the dividend influences the share price much. Top Education Group’s revenue is actually up 17% over the last year. Since the fundamental metrics don’t readily explain the share price drop, there might be an opportunity if the market has overreacted.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
If you are thinking of buying or selling Top Education Group stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
While Top Education Group shareholders are down 12% for the year (even including dividends), the market itself is up 4.5%. 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. Putting aside the last twelve months, it’s good to see the share price has rebounded by 9.3%, in the last ninety days. This could just be a bounce because the selling was too aggressive, but fingers crossed it’s the start of a new trend. It’s always interesting to track share price performance over the longer term. But to understand Top Education Group better, we need to consider many other factors. Like risks, for instance. Every company has them, and we’ve spotted 3 warning signs for Top Education Group (of which 2 are a bit unpleasant!) you should know about.
But note: Top Education Group may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
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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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