It's easy to match the overall market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in Blue Moon Group Holdings Limited (HKG:6993) have tasted that bitter downside in the last year, as the share price dropped 37%. That falls noticeably short of the market decline of around 24%. We wouldn't rush to judgement on Blue Moon Group Holdings because we don't have a long term history to look at. Furthermore, it's down 13% in about a quarter. That's not much fun for holders. Of course, this share price action may well have been influenced by the 18% decline in the broader market, throughout the period.

It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.

Check out our latest analysis for Blue Moon Group Holdings

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Unhappily, Blue Moon Group Holdings had to report a 33% decline in EPS over the last year. This proportional reduction in earnings per share isn't far from the 37% decrease in the share price. Therefore one could posit that the market has not become more concerned about the company, despite the lower EPS. Instead, the change in the share price seems to reduction in earnings per share, alone.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

This free interactive report on Blue Moon Group Holdings' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Blue Moon Group Holdings shareholders are down 36% for the year (even including dividends), even worse than the market loss of 24%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. With the stock down 13% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 1 warning sign for Blue Moon Group Holdings that you should be aware of before investing here.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.