The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. For example, the KML Technology Group Limited (HKG:8065) share price is down 26% in the last year. That's disappointing when you consider the market returned -13%. Because KML Technology Group hasn't been listed for many years, the market is still learning about how the business performs.
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See our latest analysis for KML Technology Group
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. 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.
During the last year KML Technology Group grew its earnings per share, moving from a loss to a profit. When a company has just transitioned to profitability, earnings per share growth is not always the best way to look at the share price action. So it makes sense to check out some other factors.
Revenue was pretty flat on last year, which isn't too bad. However, it is certainly possible the market was expecting an uptick in revenue, and that the share price fall reflects that disappointment.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
Balance sheet strength is crucual. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
KML Technology Group shareholders are down 26% for the year, even worse than the market loss of 13%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. The share price decline has continued throughout the most recent three months, down 9.7%, 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. Is KML Technology Group cheap compared to other companies? These 3 valuation measures might help you decide.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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. Thank you for reading.