Earnings are growing at Zhou Hei Ya International Holdings (HKG:1458) but shareholders still don't like its prospects

By
Simply Wall St
Published
March 16, 2022
SEHK:1458
Source: Shutterstock

Even the best stock pickers will make plenty of bad investments. And unfortunately for Zhou Hei Ya International Holdings Company Limited (HKG:1458) shareholders, the stock is a lot lower today than it was a year ago. The share price is down a hefty 56% in that time. However, the longer term returns haven't been so bad, with the stock down 2.6% in the last three years. Shareholders have had an even rougher run lately, with the share price down 38% in the last 90 days. Of course, this share price action may well have been influenced by the 19% decline in the broader market, throughout the period.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

See our latest analysis for Zhou Hei Ya International Holdings

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

During the unfortunate twelve months during which the Zhou Hei Ya International Holdings share price fell, it actually saw its earnings per share (EPS) improve by 200%. Of course, the situation might betray previous over-optimism about growth.

It's fair to say that the share price does not seem to be reflecting the EPS growth. But we might find some different metrics explain the share price movements better.

Zhou Hei Ya International Holdings' revenue is actually up 11% over the last year. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.

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

earnings-and-revenue-growth
SEHK:1458 Earnings and Revenue Growth March 16th 2022

We know that Zhou Hei Ya International Holdings has improved its bottom line lately, but what does the future have in store? So we recommend checking out this free report showing consensus forecasts

A Different Perspective

While the broader market lost about 31% in the twelve months, Zhou Hei Ya International Holdings shareholders did even worse, losing 56% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Take risks, for example - Zhou Hei Ya International Holdings has 1 warning sign we think you should be aware of.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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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