It is a pleasure to report that the Haidilao International Holding Ltd. (HKG:6862) is up 40% in the last quarter. But that’s small comfort given the dismal price performance over the last year. Like an arid lake in a warming world, shareholder value has evaporated, with the share price down 61% in that time. So the bounce should be viewed in that context. You could argue that the sell-off was too severe.
Although the past week has been more reassuring for shareholders, they’re still in the red over the last year, so let’s see if the underlying business has been responsible for the decline.
View our latest analysis for Haidilao International Holding
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
Haidilao International Holding fell to a loss making position during the year. Buyers no doubt think it’s a temporary situation, but those with a nose for quality have low tolerance for losses. Of course, if the company can turn the situation around, investors will likely profit.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of Haidilao International Holding’s earnings, revenue and cash flow.
A Different Perspective
The last twelve months weren’t great for Haidilao International Holding shares, which performed worse than the market, costing holders 61%. Meanwhile, the broader market slid about 20%, likely weighing on the stock. Shareholders have lost 14% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. It’s always interesting to track share price performance over the longer term. But to understand Haidilao International Holding better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we’ve spotted with Haidilao International Holding .
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.
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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.