Steve Leung Design Group's (HKG:2262) Shareholders Are Down 37% On Their Shares

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by Steve Leung Design Group Limited (HKG:2262) shareholders over the last year, as the share price declined 37%. That falls noticeably short of the market return of around 20%. Steve Leung Design Group hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. It's down 5.6% in the last seven days.

View our latest analysis for Steve Leung Design Group

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

During the unfortunate twelve months during which the Steve Leung Design Group share price fell, it actually saw its earnings per share (EPS) improve by 129%. It could be that the share price was previously over-hyped.

It's surprising to see the share price fall so much, despite the improved EPS. But we might find some different metrics explain the share price movements better.

Given the yield is quite low, at 1.5%, we doubt the dividend can shed much light on the share price. On the other hand, we're certainly perturbed by the 6.3% decline in Steve Leung Design Group's revenue. Many investors see falling revenue as a likely precursor to lower earnings, so this could well explain the weak share price.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Take a more thorough look at Steve Leung Design Group's financial health with this free report on its balance sheet.

A Different Perspective

Given that the market gained 20% in the last year, Steve Leung Design Group shareholders might be miffed that they lost 36% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The share price decline has continued throughout the most recent three months, down 6.6%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. It's always interesting to track share price performance over the longer term. But to understand Steve Leung Design Group better, we need to consider many other factors. Take risks, for example - Steve Leung Design Group has 2 warning signs (and 1 which is concerning) we think you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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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