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Investing in stocks inevitably means buying into some companies that perform poorly. Long term Winfull Group Holdings Limited (HKG:183) shareholders know that all too well, since the share price is down considerably over three years. Unfortunately, they have held through a 54% decline in the share price in that time. And more recent buyers are having a tough time too, with a drop of 32% in the last year.
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View our latest analysis for Winfull Group 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. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Although the share price is down over three years, Winfull Group Holdings actually managed to grow EPS by 48% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past. It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.
The modest 1.7% dividend yield is unlikely to be guiding the market view of the stock. Revenue is actually up 81% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worht worth investigating Winfull Group Holdings further; while we may be missing something on this analysis, there might also be an opportunity.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
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. This free interactive report on Winfull Group Holdings's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
While the broader market lost about 12% in the twelve months, Winfull Group Holdings shareholders did even worse, losing 31% (even including dividends). 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 14% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.