Did Changing Sentiment Drive Lap Kei Engineering (Holdings)'s (HKG:1690) Share Price Down A Worrying 55%?

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Even the best stock pickers will make plenty of bad investments. And there's no doubt that Lap Kei Engineering (Holdings) Limited (HKG:1690) stock has had a really bad year. The share price has slid 55% in that time. At least the damage isn't so bad if you look at the last three years, since the stock is down 16% in that time. Shareholders have had an even rougher run lately, with the share price down 26% in the last 90 days.

View our latest analysis for Lap Kei Engineering (Holdings)

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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, Lap Kei Engineering (Holdings) had to report a 35% decline in EPS over the last year. The share price decline of 55% is actually more than the EPS drop. 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 11.57.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Dive deeper into the earnings by checking this interactive graph of Lap Kei Engineering (Holdings)'s earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

We've already covered Lap Kei Engineering (Holdings)'s share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Lap Kei Engineering (Holdings)'s TSR, which was a 55% drop over the last year, was not as bad as the share price return.

A Different Perspective

The last twelve months weren't great for Lap Kei Engineering (Holdings) shares, which performed worse than the market, costing holders 55%. The market shed around 15%, no doubt weighing on the stock price. The three-year loss of 4.6% 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. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

Lap Kei Engineering (Holdings) is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.