Advertisement

Some Wenzhou Kangning Hospital (HKG:2120) Shareholders Are Down 42%

The simplest way to benefit from a rising market is to buy an index fund. But if you buy individual stocks, you can do both better or worse than that. For example, the Wenzhou Kangning Hospital Co., Ltd. (HKG:2120) share price is down 42% in the last year. That contrasts poorly with the market return of -4.2%. Even if you look out three years, the returns are still disappointing, with the share price down39% in that time. More recently, the share price has dropped a further 11% in a month.

View our latest analysis for Wenzhou Kangning Hospital

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Even though the Wenzhou Kangning Hospital share price is down over the year, its EPS actually improved. It's quite possible that growth expectations may have been unreasonable in the past.

It's surprising to see the share price fall so much, despite the improved EPS. So it's well worth checking out some other metrics, too.

With a low yield of 0.8% we doubt that the dividend influences the share price much. Wenzhou Kangning Hospital managed to grow revenue over the last year, which is usually a real positive. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

SEHK:2120 Income Statement, February 24th 2020
SEHK:2120 Income Statement, February 24th 2020

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. If you are thinking of buying or selling Wenzhou Kangning Hospital stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

The last twelve months weren't great for Wenzhou Kangning Hospital shares, which performed worse than the market, costing holders 42% , including dividends . Meanwhile, the broader market slid about 4.2%, likely weighing on the stock. The three-year loss of 14% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. 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. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.

There are plenty of other companies that have insiders buying up shares. You probably do 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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.

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. Thank you for reading.