The past year was not a profitable one for Hong Kong (SGX:H30) investors

Passive investing in an index fund is a good way to ensure that your own returns will be roughly in line with the overall market. Active investors seek to buy stocks that significantly outperform the market—but in the process, they risk underperformance. Investors in Hong Fok Corporation Limited (SGX:H30) has taken a bitter hit in the past year, with its share price down 21%. That contrasts poorly with the market’s 1.1% decline. At least the damage isn’t as bad when you look at the past three years, with the stock down 6.2% in that time. It’s also down 10% in about a quarter. That’s not exactly a happy experience for holders.

With this in mind, it is worth checking whether the company’s fundamental assumptions have an impact on its long-term performance, or if there are any discrepancies.

Check out our latest analysis for Hong Kong

In his essay Graham-and-Doddsville Super Investors Warren Buffett has described how stock prices do not always rationally reflect the value of a company. One flawed but reasonable way to assess how sentiment around a company has changed is to compare earnings per share (EPS) to the share price.

Unfortunately, Hong Fok had to report a 59% decline in EPS over the past year. This EPS decline is significantly worse than the 21% decline in the share price. Perhaps the weak EPS was not as bad as some feared.

The company’s earnings per share (over time) are shown in the chart below (click to see the exact numbers).

Maybe it’s worth taking a look at ours free Hong Fok’s earnings, revenues and cash flow report.

Another perspective

Hong Fok shareholders are down 20% for the year (even including dividends), but the market itself is up 1.1%. However, it is important to remember that even the best stocks will sometimes underperform the market over a twelve-month period. Unfortunately, last year’s performance may indicate unresolved issues, given that it was worse than the annualized loss of 0.9% over the past half-century. Generally speaking, long-term share price weakness can be a bad sign, although contrarian investors may want to research the stock in the hope of a trend reversal. While it is worth considering the different effects that market conditions can have on the share price, there are other factors that are even more important. To do this, it is important to learn about 3 warning signs we noticed at Hong Kong’s (including one that we didn’t like).

For those who like to find winning investments This free a list of undervalued companies whose recent purchases were made by insiders may be just what you’re looking for.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Singapore exchanges.

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This Simply Wall St article is for general information purposes only. Our commentary is based solely on historical data and analyst forecasts, and is based on an objective methodology. Our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or your financial situation. Our goal is to provide you with long-term, focused analysis based on fundamental data. Please note that our analysis may not reflect the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.