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Positive earnings growth hasn't been enough to get XJ International Holdings (HKG:1765) shareholders a favorable return over the last five years
Some stocks are best avoided. We really hate to see fellow investors lose their hard-earned money. Spare a thought for those who held XJ International Holdings Co., Ltd. (HKG:1765) for five whole years - as the share price tanked 90%. While a drop like that is definitely a body blow, money isn't as important as health and happiness.
The recent uptick of 10% could be a positive sign of things to come, so let's take a look at historical fundamentals.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the unfortunate half decade during which the share price slipped, XJ International Holdings actually saw its earnings per share (EPS) improve by 1.7% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Alternatively, growth expectations may have been unreasonable in the past.
By glancing at these numbers, we'd posit that the the market had expectations of much higher growth, five years ago. Having said that, we might get a better idea of what's going on with the stock by looking at other metrics.
In contrast to the share price, revenue has actually increased by a year in the five year period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Dive deeper into the earnings by checking this interactive graph of XJ International Holdings' earnings, revenue and cash flow.
A Different Perspective
It's nice to see that XJ International Holdings shareholders have received a total shareholder return of 49% over the last year. Notably the five-year annualised TSR loss of 14% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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 XJ International Holdings by clicking this link.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap 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 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.
About SEHK:1765
XJ International Holdings
An investment holding company, engages in the provision of higher education and secondary vocational education services in China and Malaysia.
Solid track record and good value.
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