Wisdom Education International Holdings (HKG:6068) Share Prices Have Dropped 26% In The Last Three Years

It is a pleasure to report that the Wisdom Education International Holdings Company Limited (HKG:6068) is up 35% in the last quarter. But that doesn't help the fact that the three year return is less impressive. Truth be told the share price declined 26% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

See our latest analysis for Wisdom Education International Holdings

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 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.

Although the share price is down over three years, Wisdom Education International Holdings actually managed to grow EPS by 32% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

We note that, in three years, revenue has actually grown at a 22% annual rate, so that doesn't seem to be a reason to sell shares. This analysis is just perfunctory, but it might be worth researching Wisdom Education International Holdings more closely, as sometimes stocks fall unfairly. This could present an opportunity.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So we recommend checking out this free report showing consensus forecasts

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Wisdom Education International Holdings the TSR over the last 3 years was -20%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Over the last year Wisdom Education International Holdings shareholders have received a TSR of 20%. Unfortunately this falls short of the market return of around 25%. The silver lining is that the recent rise is far preferable to the annual loss of 6% that shareholders have suffered over the last three years. We hope the turnaround in fortunes continues. 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. For instance, we've identified 5 warning signs for Wisdom Education International Holdings that you should be aware of.

Wisdom Education International Holdings is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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. 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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