The one-year loss for Scholar Education Group (HKG:1769) shareholders likely driven by its shrinking earnings

By
Simply Wall St
Published
December 12, 2021
SEHK:1769
Source: Shutterstock

This month, we saw the Scholar Education Group (HKG:1769) up an impressive 69%. But that isn't much consolation for the painful drop we've seen in the last year. To wit, the stock has dropped 83% over the last year. Arguably, the recent bounce is to be expected after such a bad drop. The bigger issue is whether the company can sustain the momentum in the long term. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

While the last year has been tough for Scholar Education Group shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

View our latest analysis for Scholar Education Group

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Unhappily, Scholar Education Group had to report a 58% decline in EPS over the last year. The share price decline of 83% is actually more than the EPS drop. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

earnings-per-share-growth
SEHK:1769 Earnings Per Share Growth December 12th 2021

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on Scholar Education Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Scholar Education Group shareholders are down 81% for the year (even including dividends), even worse than the market loss of 0.6%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. It's great to see a nice little 32% rebound in the last three months. Let's just hope this isn't the widely-feared 'dead cat bounce' (which would indicate further declines to come). 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. Case in point: We've spotted 4 warning signs for Scholar Education Group you should be aware of.

Of course Scholar Education Group may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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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