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When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For instance, the price of Chinasoft International Limited (HKG:354) stock is up an impressive 108% over the last five years. On top of that, the share price is up 40% in about a quarter. But this could be related to the strong market, which is up 17% in the last three months.
See our latest analysis for Chinasoft International
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over half a decade, Chinasoft International managed to grow its earnings per share at 29% a year. The EPS growth is more impressive than the yearly share price gain of 16% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of Chinasoft International's earnings, revenue and cash flow.
A Different Perspective
While the broader market lost about 1.3% in the twelve months, Chinasoft International shareholders did even worse, losing 27% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 16%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Chinasoft International by clicking this link.