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One simple way to benefit from the stock market is to buy an index fund. But if you pick the right individual stocks, you could make more than that. Just take a look at FSE Services Group Limited (HKG:331), which is up 48%, over three years, soundly beating the market return of 1.5% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 14% , including dividends .
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 three years of share price growth, FSE Services Group achieved compound earnings per share growth of 9.0% per year. In comparison, the 14% per year gain in the share price outpaces the EPS growth. So it's fair to assume the market has a higher opinion of the business than it did three years ago. It's not unusual to see the market 're-rate' a stock, after a few years of growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
This free interactive report on FSE Services Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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