Did Differ Group Holding's (HKG:6878) Share Price Deserve to Gain 59%?

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Differ Group Holding Company Limited (HKG:6878) share price is 59% higher than it was a year ago, much better than the market return of around 23% (not including dividends) in the same period. That's a solid performance by our standards! However, the longer term returns haven't been so impressive, with the stock up just 25% in the last three years.

View our latest analysis for Differ Group Holding

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.

Over the last twelve months, Differ Group Holding actually shrank its EPS by 33%.

This means it's unlikely the market is judging the company based on earnings growth. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.

However the year on year revenue growth of 704% would help. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

If you are thinking of buying or selling Differ Group Holding stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

It's good to see that Differ Group Holding has rewarded shareholders with a total shareholder return of 59% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 1.2% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Differ Group Holding (of which 1 can't be ignored!) 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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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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