China Feihe (HKG:6186) investors are sitting on a loss of 53% if they invested a year ago

By
Simply Wall St
Published
January 17, 2022
SEHK:6186
Source: Shutterstock

Taking the occasional loss comes part and parcel with investing on the stock market. And there's no doubt that China Feihe Limited (HKG:6186) stock has had a really bad year. To wit the share price is down 54% in that time. China Feihe hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. Shareholders have had an even rougher run lately, with the share price down 21% in the last 90 days.

Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

Check out our latest analysis for China Feihe

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

Even though the China Feihe share price is down over the year, its EPS actually improved. It could be that the share price was previously over-hyped.

The divergence between the EPS and the share price is quite notable, during the year. So it's easy to justify a look at some other metrics.

Vibrant companies don't usually cut their dividends, so the recent reduction might help explain why the China Feihe share price has been weak.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

earnings-and-revenue-growth
SEHK:6186 Earnings and Revenue Growth January 17th 2022

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. This free report showing analyst forecasts should help you form a view on China Feihe

A Different Perspective

We doubt China Feihe shareholders are happy with the loss of 53% over twelve months (even including dividends). That falls short of the market, which lost 9.0%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. With the stock down 21% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. 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. To that end, you should learn about the 3 warning signs we've spotted with China Feihe (including 1 which is a bit concerning) .

China Feihe 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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