While shareholders of Playmates Toys (HKG:869) are in the black over 1 year, those who bought a week ago aren't so fortunate

Playmates Toys Limited (HKG:869) shareholders might be concerned after seeing the share price drop 14% in the last month. Despite this, the stock is a strong performer over the last year, no doubt about that. Indeed, the share price is up an impressive 161% in that time. So it may be that the share price is simply cooling off after a strong rise. Investors should be wondering whether the business itself has the fundamental value required to continue to drive gains.

While the stock has fallen 10% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

View our latest analysis for Playmates Toys

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 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).

During the last year Playmates Toys grew its earnings per share, moving from a loss to a profit.

When a company is just on the edge of profitability it can be well worth considering other metrics in order to more precisely gauge growth (and therefore understand share price movements).

We think that the revenue growth of 47% could have some investors interested. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Take a more thorough look at Playmates Toys' financial health with this free report on its balance sheet.

A Different Perspective

It's good to see that Playmates Toys has rewarded shareholders with a total shareholder return of 161% in the last twelve months. That certainly beats the loss of about 8% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Playmates Toys has 3 warning signs (and 1 which is significant) we think you should know about.

We will like Playmates Toys 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 HK 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.
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