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The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. For example, the E-House (China) Enterprise Holdings Limited (HKG:2048) share price is down 39% in the last year. That falls noticeably short of the market return of around 5.5%. E-House (China) Enterprise 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. There was little comfort for shareholders in the last week as the price declined a further 2.5%.
Check out our latest analysis for E-House (China) Enterprise 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).
Unhappily, E-House (China) Enterprise Holdings had to report a 24% decline in EPS over the last year. This reduction in EPS is not as bad as the 39% share price fall. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock. The P/E ratio of 10.90 also points to the negative market sentiment.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It is of course excellent to see how E-House (China) Enterprise Holdings has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at E-House (China) Enterprise Holdings's financial health with this free report on its balance sheet.
A Different Perspective
Given that the market gained 5.5% in the last year, E-House (China) Enterprise Holdings shareholders might be miffed that they lost 37% (even including dividends) . However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Putting aside the last twelve months, it's good to see the share price has rebounded by 4.7%, in the last ninety days. This could just be a bounce because the selling was too aggressive, but fingers crossed it's the start of a new trend. Before forming an opinion on E-House (China) Enterprise Holdings you might want to consider these 3 valuation metrics.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.