Imagine Owning Tokyo Chuo Auction Holdings (HKG:1939) And Wondering If The 49% Share Price Slide Is Justified

It’s easy to match the overall market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. For example, the Tokyo Chuo Auction Holdings Limited (HKG:1939) share price is down 49% in the last year. That’s disappointing when you consider the market returned 3.0%. Tokyo Chuo Auction Holdings hasn’t been listed for long, so although we’re wary of recent listings that perform poorly, it may still prove itself with time. Unfortunately the share price momentum is still quite negative, with prices down 14% in thirty days.

Check out our latest analysis for Tokyo Chuo Auction Holdings

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. 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.

Unhappily, Tokyo Chuo Auction Holdings had to report a 13% decline in EPS over the last year. The share price decline of 49% is actually more than the EPS drop. So it seems the market was too confident about the business, a year ago.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

SEHK:1939 Past and Future Earnings, January 26th 2020
SEHK:1939 Past and Future Earnings, January 26th 2020

It might be well worthwhile taking a look at our free report on Tokyo Chuo Auction Holdings’s earnings, revenue and cash flow.

A Different Perspective

While Tokyo Chuo Auction Holdings shareholders are down 48% for the year (even including dividends) , the market itself is up 3.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Putting aside the last twelve months, it’s good to see the share price has rebounded by 1.3%, in the last ninety days. Let’s just hope this isn’t the widely-feared ‘dead cat bounce’ (which would indicate further declines to come). 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. Be aware that Tokyo Chuo Auction Holdings is showing 5 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable…

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.

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. Thank you for reading.