Earnings growth of 65% over 1 year hasn’t been enough to translate into positive returns for Sunac Services Holdings (HKG:1516) shareholders

Leonardo Rasaki

As every investor would know, you don’t hit a homerun every time you swing. But it’s not unreasonable to try to avoid truly shocking capital losses. So spare a thought for the long term shareholders of Sunac Services Holdings Limited (HKG:1516); the share price is down a whopping 87% in the last twelve months. While some investors are willing to stomach this sort of loss, they are usually professionals who spread their bets thinly. Because Sunac Services Holdings hasn’t been listed for many years, the market is still learning about how the business performs. The falls have accelerated recently, with the share price down 27% in the last three months. While a drop like that is definitely a body blow, money isn’t as important as health and happiness.

Since Sunac Services Holdings has shed CN¥1.4b from its value in the past 7 days, let’s see if the longer term decline has been driven by the business’ economics.

View our latest analysis for Sunac Services Holdings

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. 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.

Even though the Sunac Services Holdings share price is down over the year, its EPS actually improved. Of course, the situation might betray previous over-optimism about growth.

It’s fair to say that the share price does not seem to be reflecting the EPS growth. So it’s well worth checking out some other metrics, too.

Sunac Services Holdings’ dividend seems healthy to us, so we doubt that the yield is a concern for the market. From what we can see, revenue is pretty flat, so that doesn’t really explain the share price drop. Unless, of course, the market was expecting a revenue uptick.

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

SEHK:1516 Earnings and Revenue Growth August 26th 2022

Sunac Services Holdings is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

Sunac Services Holdings shareholders are down 86% for the year (even including dividends), even worse than the market loss of 19%. 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 27%, 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. It’s always interesting to track share price performance over the longer term. But to understand Sunac Services Holdings better, we need to consider many other factors. Even so, be aware that Sunac Services Holdings is showing 3 warning signs in our investment analysis , and 1 of those is a bit concerning…

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.

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.

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