Market is not liking Radiance Holdings (Group)'s (HKG:9993) earnings decline as stock retreats 7.6% this week

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by Radiance Holdings (Group) Company Limited (HKG:9993) shareholders over the last year, as the share price declined 11%. That contrasts poorly with the market decline of 2.7%. Because Radiance Holdings (Group) hasn't been listed for many years, the market is still learning about how the business performs. The last week also saw the share price slip down another 7.6%. However, this move may have been influenced by the broader market, which fell 4.2% in that time.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

Check out our latest analysis for Radiance Holdings (Group)

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

Unfortunately Radiance Holdings (Group) reported an EPS drop of 48% for the last year. The share price fall of 11% isn't as bad as the reduction in earnings per share. It may have been that the weak EPS was not as bad as some had feared.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of Radiance Holdings (Group)'s earnings, revenue and cash flow.

A Different Perspective

Radiance Holdings (Group) shareholders are down 11% for the year, even worse than the market loss of 2.7%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. With the stock down 0.5% 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. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Radiance Holdings (Group) (at least 1 which makes us a bit uncomfortable) , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong exchanges.

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.