Imagine Owning Kwoon Chung Bus Holdings (HKG:306) And Wondering If The 41% Share Price Slide Is Justified
The simplest way to benefit from a rising market is to buy an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in Kwoon Chung Bus Holdings Limited (HKG:306) have tasted that bitter downside in the last year, as the share price dropped 41%. That contrasts poorly with the market return of -6.3%. We note that it has not been easy for shareholders over three years, either; the share price is down 34% in that time. The falls have accelerated recently, with the share price down 13% in the last three months.
Check out our latest analysis for Kwoon Chung Bus Holdings
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.
Even though the Kwoon Chung Bus Holdings share price is down over the year, its EPS actually improved. Of course, the situation might betray previous over-optimism about growth.
By glancing at these numbers, we'd posit that the the market had expectations of much higher growth, last year. But other metrics might shed some light on why the share price is down.
Kwoon Chung Bus Holdings's revenue is actually up 14% over the last year. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on Kwoon Chung Bus Holdings's earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Kwoon Chung Bus Holdings's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Kwoon Chung Bus Holdings's TSR, which was a 39% drop over the last year, was not as bad as the share price return.
A Different Perspective
While the broader market lost about 6.3% in the twelve months, Kwoon Chung Bus Holdings shareholders did even worse, losing 39%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 0.7% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Kwoon Chung Bus Holdings better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Kwoon Chung Bus Holdings (of which 1 is significant!) you should know about.
Kwoon Chung Bus Holdings is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
