It’s easy to match the overall market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by Hospital Corporation of China Limited (HKG:3869) shareholders over the last year, as the share price declined 22%. That falls noticeably short of the market return of around -6.5%. Because Hospital of China hasn’t been listed for many years, the market is still learning about how the business performs. Furthermore, it’s down 21% in about a quarter. That’s not much fun for holders.
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.
Unfortunately Hospital of China reported an EPS drop of 673% for the last year. This was, in part, due to extraordinary items impacting earnings. In fact, it actually made a loss over the last twelve months. This fall in the EPS is significantly worse than the 22% the share price fall. It may have been that the weak EPS was not as bad as some had feared.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
This free interactive report on Hospital of China’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
We doubt Hospital of China shareholders are happy with the loss of 22% over twelve months. That falls short of the market, which lost 6.5%. That’s disappointing, but it’s worth keeping in mind that the market-wide selling wouldn’t have helped. 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. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
But note: Hospital of China 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.