Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by Eternity Technology Holdings Limited (HKG:1725) shareholders over the last year, as the share price declined 13%. That’s disappointing when you consider the market declined 8.8%. Eternity Technology 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 share price has dropped 36% in three months.
See our latest analysis for Eternity Technology 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 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.
During the unfortunate twelve months during which the Eternity Technology Holdings share price fell, it actually saw its earnings per share (EPS) improve by 4.4%. It’s quite possible that growth expectations may have been unreasonable in the past.
By glancing at these numbers, we’d posit that the the market had expectations of much higher growth, last year. But other metrics might shed some light on why the share price is down.
Revenue was pretty flat on last year, which isn’t too bad. But the share price might be lower because the market expected a meaningful improvement, and got none.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
If you are thinking of buying or selling Eternity Technology Holdings stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
We doubt Eternity Technology Holdings shareholders are happy with the loss of 13% over twelve months. That falls short of the market, which lost 8.8%. That’s disappointing, but it’s worth keeping in mind that the market-wide selling wouldn’t have helped. It’s worth noting that the last three months did the real damage, with a 36% decline. So it seems like some holders have been dumping the stock of late – and that’s not bullish. It’s always interesting to track share price performance over the longer term. But to understand Eternity Technology Holdings better, we need to consider many other factors. Like risks, for instance. Every company has them, and we’ve spotted 3 warning signs for Eternity Technology Holdings (of which 1 makes us a bit uncomfortable!) you should know about.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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