Imagine Owning Clifford Modern Living Holdings (HKG:3686) And Wondering If The 19% Share Price Slide Is Justified

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It’s easy to match the overall market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. For example, the Clifford Modern Living Holdings Limited (HKG:3686) share price is down 19% in the last year. That falls noticeably short of the market return of around -7.9%. Because Clifford Modern Living Holdings hasn’t been listed for many years, the market is still learning about how the business performs. It’s down 3.4% in the last seven days.

View our latest analysis for Clifford Modern Living 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 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.

Even though the Clifford Modern Living Holdings share price is down over the year, its EPS actually improved. It’s quite possible that growth expectations may have been unreasonable in the past. It’s surprising to see the share price fall so much, despite the improved EPS. So it’s easy to justify a look at some other metrics.

On the other hand, we’re certainly perturbed by the 6.5% decline in Clifford Modern Living Holdings’s revenue. Many investors see falling revenue as a likely precursor to lower earnings, so this could well explain the weak share price.

The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.

SEHK:3686 Income Statement, May 10th 2019
SEHK:3686 Income Statement, May 10th 2019

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Clifford Modern Living Holdings’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Clifford Modern Living Holdings shareholders are down 17% for the year (even including dividends), even worse than the market loss of 7.9%. That’s disappointing, but it’s worth keeping in mind that the market-wide selling wouldn’t have helped. With the stock down 9.5% 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. 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.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

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.