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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. We wouldn't blame KOS International Holdings Limited (HKG:8042) shareholders if they were still in shock after the stock dropped like a lead balloon, down 88% in just one year. That'd be a striking reminder about the importance of diversification. KOS International Holdings may have better days ahead, of course; we've only looked at a one year period. Furthermore, it's down 25% in about a quarter. That's not much fun for holders. However, one could argue that the price has been influenced by the general market, which is down 15% in the same timeframe.
We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
View our latest analysis for KOS International 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. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the last year KOS International Holdings grew its earnings per share, moving from a loss to a profit.
The result looks like a strong improvement to us, so we're surprised the market has sold down the shares. If the improved profitability is a sign of things to come, then right now may prove the perfect time to pop this stock on your watchlist.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
A Different Perspective
We doubt KOS International Holdings shareholders are happy with the loss of 88% over twelve months. That falls short of the market, which lost 18%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. The share price decline has continued throughout the most recent three months, down 25%, 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. 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. For instance, we've identified 3 warning signs for KOS International Holdings (1 is potentially serious) that you should be aware of.