If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can significantly boost your returns by picking above-average stocks. For example, the Greentown Service Group Co. Ltd. (HKG:2869) share price is up 13% in the last year, clearly besting than the market return of around -12% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! Note that businesses generally develop over the long term, so it the returns over the last year might not reflect a long term trend.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Greentown Service Group was able to grow EPS by 29% in the last twelve months. It’s fair to say that the share price gain of 13% did not keep pace with the EPS growth. So it seems like the market has cooled on Greentown Service Group, despite the growth. Interesting.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Greentown Service Group has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
A Different Perspective
It’s nice to see that Greentown Service Group shareholders have gained 14% over the last year, including dividends. A substantial portion of that gain has come in the last three months, with the stock up 9.0% in that time. Demand for the stock from multiple parties is pushing the price higher; it could be that word is getting out about its virtues as a business. Before forming an opinion on Greentown Service Group you might want to consider these 3 valuation metrics.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).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 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. Thank you for reading.