This week’s 11% return takes Hong Kong Education (Int’l) Investments (HKG:1082) shareholders’ three-year earnings to 349%

For us, stock picking is largely the hunt for truly magnificent stock. You won’t be successful every time, but when you do, the returns can be truly splendid. A stock of bright shining stars has been Hong Kong Education (Int’l) Investments Limited (HKG:1082), which is 349% more than three years ago. And last week, the stock price jumped 11%.

Given that the stock has added HK$95 million to its market capitalization in the past week alone, let’s see if the underlying performance has generated long-term returns.

Check out our latest analysis for Hong Kong Education (Int’l) Investments

We don’t think Hong Kong Education (Int’l) Investments’ modest year-over-year profit is getting the full attention of the market at this time. We think revenue is probably a better guide. Generally, we think this type of company is more comparable to loss-making stocks because the actual profit is so low. It would be hard to believe in a more profitable future without revenue growth.

Over the past 3 years, Hong Kong Education (Int’l) Investments has seen its turnover decline by 51% per year. This contrasts sharply with the stock price’s strong growth of 65%, compounded, per year. There is no doubt that this kind of decoupling of revenue growth and stock price growth is unusual in loss-making companies. So there is a serious possibility that some keepers count their chickens before they hatch.

The image below shows how earnings and income have tracked over time (if you click on the image you can see more details).

SEHK: 1082 Earnings and Revenue Growth January 17, 2022

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive chart.

A different perspective

We are pleased to report that Hong Kong Education (Int’l) Investments shareholders received a 31% year-on-year total shareholder return. This gain is better than the five-year annual TSR, which is 9%. Therefore, it seems that the sentiment around the company has been positive lately. Someone with an optimistic outlook might see the recent improvement in TSR as indicating that the company itself is improving over time. I find it very interesting to look at stock price over the long term as a proxy for company performance. But to really get insight, we also need to consider other information. Take risks, for example – Hong Kong Education (Int’l) Investments has 2 warning signs we think you should know.

But note: Education investments in Hong Kong (Int’l) may not be the best stocks to buy. So take a look at this free list of interesting companies with past earnings growth (and new growth forecasts).

Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently trading on HK exchanges.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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