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Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. Investors in China Boqi Environmental (Holding) Co., Ltd. (HKG:2377) have tasted that bitter downside in the last year, as the share price dropped 26%. That falls noticeably short of the market return of around -14%. Because China Boqi Environmental (Holding) hasn’t been listed for many years, the market is still learning about how the business performs. It’s down 3.8% in the last seven days.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
China Boqi Environmental (Holding) managed to increase earnings per share from a loss to a profit, over the last 12 months. We’re surprised that the share price is lower given that improvement. If the company can sustain the earnings growth, this might be an inflection point for the business, which would make right now a really interesting time to study it more closely.
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. That said, we think earnings and revenue growth trends are even more important factors to consider. Dive deeper into the earnings by checking this interactive graph of China Boqi Environmental (Holding)’s earnings, revenue and cash flow.
A Different Perspective
We doubt China Boqi Environmental (Holding) shareholders are happy with the loss of 26% over twelve months (even including dividends). That falls short of the market, which lost 14%. That’s disappointing, but it’s worth keeping in mind that the market-wide selling wouldn’t have helped. The share price decline has continued throughout the most recent three months, down 7.9%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we’d remain pretty wary until we see some strong business performance. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of China Boqi Environmental (Holding) by clicking this link.
China Boqi Environmental (Holding) 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 email@example.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.