Investors can get closer to the average market return by purchasing an index fund. When you buy individual stocks, you may realize higher profits, but you also run the risk of underperformance. For example, the China Kepei Education Group Limited (HKG: 1890) the stock price has fallen 41% in the past year. This is well below the market’s decline of 7.3%. We wouldn’t rush to pass judgment on the China Kepei Education Group because we don’t have a long-term history to look at. Shareholders have had an even tougher time lately, with the stock price falling 23% in the past 90 days. Note that the company published results quite recently; and the market is hardly happy. You can see the latest figures in our corporate report.
On a more encouraging note, the company added CNN 584 million to its market cap in the past 7 days alone. So let’s see if we can figure out what caused the loss of a year for shareholders.
Check out our latest analysis for China Kepei Education Group
While the markets are a powerful pricing mechanism, stock prices reflect investor sentiment, not just underlying business performance. One way to look at how market sentiment has changed over time is to look at the interaction between a company’s stock price and its earnings per share (EPS).
Unfortunately, China Kepei Education Group has had to report a 25% drop in its EPS over the past year. This drop in EPS is not as bad as the 41% drop in the stock price. This suggests that the fall in BPA made some shareholders more nervous about the company.
The image below shows how EPS has tracked over time (if you click on the image you can see more detail).
We consider it positive that insiders have made significant purchases in the past year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide for the business. This free China Kepei Education Group Profit, Revenue and Cash Flow Interactive Report is a great place to start if you want to study the stock further.
A different perspective
We doubt China Kepei Education Group shareholders are happy with the 39% year-over-year loss (including dividends). It is far from the market, which lost 7.3%. This is disappointing, but it should be borne in mind that selling on a market scale would not have helped. The stock price has continued to decline over the past three months, down 23%, suggesting a lack of investor enthusiasm. Basically, most investors should be wary of buying a poor performing stock unless the company itself has clearly improved. While it is worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we discovered 3 warning signs for China Kepei Education Group (1 is a bit nasty!) Which you should be aware of before investing here.
China Kepei Education Group is not the only one to buy. So take a look at this free list of growing companies with insider buying.
Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently trading on the Hong Kong stock exchanges.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only 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 into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.