Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. That downside risk was realized by China Wan Tong Yuan (Holdings) Limited (HKG:8199) shareholders over the last year, as the share price declined 32%. That contrasts poorly with the market return of -13%. China Wan Tong Yuan (Holdings) hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. The falls have accelerated recently, with the share price down 16% in the last three months. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
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Check out our latest analysis for China Wan Tong Yuan (Holdings)
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Even though the China Wan Tong Yuan (Holdings) share price is down over the year, its EPS actually improved. It's quite possible that growth expectations may have been unreasonable in the past. The divergence between the EPS and the share price is quite notable, during the year. So it's easy to justify a look at some other metrics.
In contrast, the 5.3% drop in revenue is a real concern. Many investors see falling revenue as a likely precursor to lower earnings, so this could well explain the weak share price.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
We doubt China Wan Tong Yuan (Holdings) shareholders are happy with the loss of 32% over twelve months. That falls short of the market, which lost 13%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. With the stock down 16% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. Before deciding if you like the current share price, check how China Wan Tong Yuan (Holdings) scores on these 3 valuation metrics.