The truth is that if you invest for long enough, you’re going to end up with some losing stocks. But the last three years have been particularly tough on longer term Modern Dental Group Limited (HKG:3600) shareholders. Regrettably, they have had to cope with a 55% drop in the share price over that period. The more recent news is of little comfort, with the share price down 42% in a year. On top of that, the share price has dropped a further 14% in a month. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.
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 way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).
During the three years that the share price fell, Modern Dental Group’s earnings per share (EPS) dropped by 4.8% each year. This reduction in EPS is slower than the 23% annual reduction in the share price. So it seems the market was too confident about the business, in the past.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It might be well worthwhile taking a look at our free report on Modern Dental Group’s earnings, revenue and cash flow.
A Different Perspective
The last twelve months weren’t great for Modern Dental Group shares, which performed worse than the market, costing holders 40%, including dividends. Meanwhile, the broader market slid about 0.2%, likely weighing on the stock. Shareholders have lost 22% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. If you would like to research Modern Dental Group in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
But note: Modern Dental Group may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).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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If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.