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The simplest way to invest in stocks is to buy exchange traded funds. But investors can boost returns by picking market-beating companies to own shares in. For example, the Cordlife Group Limited (SGX:P8A) share price is up 70% in the last 1 year, clearly besting the market return of around 15% (not including dividends). That's a solid performance by our standards! On the other hand, longer term shareholders have had a tougher run, with the stock falling 27% in three years.
Since the stock has added S$26m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Over the last twelve months Cordlife Group went from profitable to unprofitable. While this may prove temporary, we'd consider it a negative, so we would not have expected to see the share price up. It may be that the company has done well on other metrics.
Unfortunately Cordlife Group's fell 50% over twelve months. So the fundamental metrics don't provide an obvious explanation for the share price gain.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. This free interactive report on Cordlife Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
We're pleased to report that Cordlife Group shareholders have received a total shareholder return of 70% over one year. Notably the five-year annualised TSR loss of 4% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Cordlife Group has 3 warning signs (and 2 which make us uncomfortable) we think you should know about.
