One-year loss to Scholar Education Group shareholders (HKG: 1769) is likely due to declining profits

This month we saw the University education group (HKG: 1769) up 69%. But that’s no great consolation for the painful decline we experienced last year. Namely, the stock has fallen 83% in the past year. Arguably the recent rebound is to be expected after such a bad decline. The bigger issue is whether the business can keep the momentum going in the long run. We really hope that anyone who owns during this price crash has a diverse portfolio. Even when you lose money, you don’t have to lose your lesson.

While the past year has been difficult for shareholders of Scholar Education Group, the past week has shown signs of promise. So let’s take a look at longer-term fundamentals and see if they’ve been the driving force behind negative returns.

See our latest analysis for Scholar Education Group

To quote Buffett, “Ships will sail around the world but the Flat Earth Society will thrive. There will continue to be wide spreads between price and value in the market … ”By comparing earnings per share (EPS) and changes in stock prices over time, we can get a feel for the changes in investor attitudes towards a company over time.

Sadly, Scholar Education Group had to report a 58% drop in EPS over the past year. The 83% drop in the stock price is actually greater than the drop in EPS. Unsurprisingly, given the lack of EPS growth, the market appears to be more cautious on the stock.

You can see how EPS has changed over time in the image below (click on the graph to see the exact values).

SEHK: 1,769 Growth in earnings per share on December 12, 2021

It’s probably worth noting that CEOs are paid less than the median in companies of similar size. It’s always worth keeping an eye on CEO compensation, but a bigger question is whether the company will increase profits over the years. This free Scholar Education Group’s interactive profit, revenue and cash flow report is a great place to start if you want to delve deeper into the stock.

A different perspective

Scholar Education Group shareholders are down 81% on the year (including dividends), even worse than the market loss of 0.6%. This is disappointing, but it should be borne in mind that selling on a market scale would not have helped. It’s great to see a nice little 32% rebound over the past three months. Let’s just hope this isn’t the dreaded “dead cat rebound” (which would point to more lows to come). I find it very interesting to look at the stock price over the long term as an indicator of company performance. But to really gain insight, we have to take other information into account as well. Concrete example: we have spotted 4 warning signs for Scholar Education Group you must be aware.

Sure Scholar Education Group may not be the best stock to buy. So you might want to see this free collection of growth stocks.

Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently trading on the Hong Kong stock exchanges.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only 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 into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.

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