As an investor its worth striving to ensure your overall portfolio beats the market average. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Quanzhou Huixin Micro-Credit Co., Ltd. (HKG:1577) shareholders have had that experience, with the share price dropping 27% in three years, versus a market return of about 4.6%.
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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the three years that the share price fell, Quanzhou Huixin Micro-Credit’s earnings per share (EPS) dropped by 6.1% each year. The share price decline of 10% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past. The less favorable sentiment is reflected in its current P/E ratio of 9.20.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It might be well worthwhile taking a look at our free report on Quanzhou Huixin Micro-Credit’s earnings, revenue and cash flow.
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