The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by Hansoh Pharmaceutical Group Company Limited (HKG:3692) shareholders over the last year, as the share price declined 11%. That's disappointing when you consider the market returned 27%. Hansoh Pharmaceutical Group may have better days ahead, of course; we've only looked at a one year period. Unhappily, the share price slid 5.0% in the last week.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Unhappily, Hansoh Pharmaceutical Group had to report a 6.3% decline in EPS over the last year. This reduction in EPS is not as bad as the 11% share price fall. This suggests the EPS fall has made some shareholders are more nervous about the business. Of course, with a P/E ratio of 61.32, the market remains optimistic.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Hansoh Pharmaceutical Group's key metrics by checking this interactive graph of Hansoh Pharmaceutical Group's earnings, revenue and cash flow.
A Different Perspective
While Hansoh Pharmaceutical Group shareholders are down 11% for the year (even including dividends), the market itself is up 27%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 8.7% 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. Is Hansoh Pharmaceutical Group cheap compared to other companies? These 3 valuation measures might help you decide.
But note: Hansoh Pharmaceutical 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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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. 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.
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