A Look At Lay Hong Berhad's (KLSE:LAYHONG) Share Price Returns

While not a mind-blowing move, it is good to see that the Lay Hong Berhad (KLSE:LAYHONG) share price has gained 11% in the last three months. But that is small recompense for the exasperating returns over three years. In that time, the share price dropped 65%. So it is really good to see an improvement. The rise has some hopeful, but turnarounds are often precarious.

See our latest analysis for Lay Hong Berhad

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Lay Hong Berhad saw its EPS decline at a compound rate of 48% per year, over the last three years. In comparison the 30% compound annual share price decline isn't as bad as the EPS drop-off. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines. This positive sentiment is also reflected in the generous P/E ratio of 47.06.

The graphic below depicts how EPS has changed over time (unveil 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

Investors in Lay Hong Berhad had a tough year, with a total loss of 19% (including dividends), against a market gain of about 5.8%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 9% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with Lay Hong Berhad (at least 2 which make us uncomfortable) , and understanding them should be part of your investment process.

We will like Lay Hong Berhad better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on MY 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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