Did Ever Reach Group (Holdings)'s (HKG:3616) Share Price Deserve to Gain 20%?

The simplest way to invest in stocks is to buy exchange traded funds. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Ever Reach Group (Holdings) Company Limited (HKG:3616) share price is 20% higher than it was a year ago, much better than the market return of around 2.0% (not including dividends) in the same period. So that should have shareholders smiling. Ever Reach Group (Holdings) hasn't been listed for long, so it's still not clear if it is a long term winner.

Check out our latest analysis for Ever Reach Group (Holdings)

There is no denying that markets are sometimes efficient, but prices do not always reflect 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.

During the last year Ever Reach Group (Holdings) grew its earnings per share (EPS) by 23%. We note that the earnings per share growth isn't far from the share price growth (of 20%). This makes us think the market hasn't really changed its sentiment around the company, in the last year. We don't think its coincidental that the share price is growing at a similar rate to the earnings per share.

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

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

Ever Reach Group (Holdings) shareholders should be happy with the total gain of 20% over the last twelve months. And the share price momentum remains respectable, with a gain of 23% in the last three months. Demand for the stock from multiple parties is pushing the price higher; it could be that word is getting out about its virtues as a business. 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 2 warning signs with Ever Reach Group (Holdings) , and understanding them should be part of your investment process.

But note: Ever Reach Group (Holdings) 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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