Chervon Holdings (HKG:2285) investors are sitting on a loss of 23% if they invested a year ago

Investors can approximate the average market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. For example, the Chervon Holdings Limited (HKG:2285) share price is down 24% in the last year. That's well below the market decline of 4.9%. Chervon Holdings may have better days ahead, of course; we've only looked at a one year period. Even worse, it's down 13% in about a month, which isn't fun at all. However, we note the price may have been impacted by the broader market, which is down 6.8% in the same time period.

Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.

Check out our latest analysis for Chervon Holdings

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 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.

Unfortunately Chervon Holdings reported an EPS drop of 20% for the last year. We note that the 24% share price drop is very close to the EPS drop. So it seems that the market sentiment has not changed much, despite the weak results. Instead, the change in the share price seems to reduction in earnings per share, alone.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It is of course excellent to see how Chervon Holdings has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Chervon Holdings' financial health with this free report on its balance sheet.

A Different Perspective

We doubt Chervon Holdings shareholders are happy with the loss of 23% over twelve months (even including dividends). That falls short of the market, which lost 4.9%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. The share price decline has continued throughout the most recent three months, down 13%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 2 warning signs for Chervon Holdings (1 is concerning) that you should be aware of.

We will like Chervon Holdings better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.