The nature of investing is that you win some, and you lose some. Anyone who held Viva Goods Company Limited (HKG:933) over the last year knows what a loser feels like. The share price has slid 60% in that time. On the bright side, the stock is actually up 33% in the last three years. The falls have accelerated recently, with the share price down 21% in the last three months.
With the stock having lost 8.0% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
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.
Unhappily, Viva Goods had to report a 12% decline in EPS over the last year. The share price decline of 60% is actually more than the EPS drop. So it seems the market was too confident about the business, a year ago. The less favorable sentiment is reflected in its current P/E ratio of 6.61.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
A Different Perspective
We regret to report that Viva Goods shareholders are down 60% for the year. Unfortunately, that's worse than the broader market decline of 11%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 14%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. To that end, you should learn about the 2 warning signs we've spotted with Viva Goods (including 1 which doesn't sit too well with us) .
Of course Viva Goods may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong 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.