Investors can earn very close to the average market return by buying an index fund. By comparison, an individual stock is unlikely to match market returns - and could well fall short. One such example is Inkeverse Group Limited (HKG:3700), which saw its share price fall 29% over a year, against a market decline of 26%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 9.3% in three years. The falls have accelerated recently, with the share price down 27% in the last three months. However, one could argue that the price has been influenced by the general market, which is down 19% in the same timeframe.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
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. 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.
Unfortunately Inkeverse Group reported an EPS drop of 24% for the last year. We note that the 29% share price drop is very close to the EPS drop. Therefore one could posit that the market has not become more concerned about the company, despite the lower EPS. Rather, the share price is remains a similar multiple of the EPS, suggesting the outlook remains the same.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
A Different Perspective
The last twelve months weren't great for Inkeverse Group shares, which performed worse than the market, costing holders 29%. Meanwhile, the broader market slid about 26%, likely weighing on the stock. The three-year loss of 3.0% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. 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. Even so, be aware that Inkeverse Group is showing 2 warning signs in our investment analysis , you should know about...
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.
Valuation is complex, but we're helping make it simple.
Find out whether Inkeverse Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free Analysis
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
Inkeverse Group Limited, an investment holding company, operates mobile live streaming platforms in the People’s Republic of China.
The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.
|Analysis Area||Score (0-6)|
Read more about these checks in the individual report sections or in our analysis model.
Flawless balance sheet and good value.