Investing in stocks comes with the risk that the share price will fall. And there's no doubt that Pop Mart International Group Limited (HKG:9992) stock has had a really bad year. In that relatively short period, the share price has plunged 68%. Pop Mart International Group may have better days ahead, of course; we've only looked at a one year period. Even worse, it's down 53% in about a month, which isn't fun at all.

Since Pop Mart International Group has shed CN¥6.7b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for Pop Mart International Group

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 Pop Mart International Group share price fell, it actually saw its earnings per share (EPS) improve by 41%. It could be that the share price was previously over-hyped.

It's surprising to see the share price fall so much, despite the improved EPS. But we might find some different metrics explain the share price movements better.

Given the yield is quite low, at 1.0%, we doubt the dividend can shed much light on the share price. Pop Mart International Group managed to grow revenue over the last year, which is usually a real positive. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Pop Mart International Group is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Pop Mart International Group in this interactive graph of future profit estimates.

A Different Perspective

Pop Mart International Group shareholders are down 68% for the year (even including dividends), even worse than the market loss of 17%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. The share price decline has continued throughout the most recent three months, down 50%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 2 warning signs for Pop Mart International Group (1 makes us a bit uncomfortable!) 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.