Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by RISE Education Cayman Ltd (NASDAQ:REDU) shareholders over the last year, as the share price declined 27%. That's well bellow the market return of 3.0%. We wouldn't rush to judgement on RISE Education Cayman because we don't have a long term history to look at. Contrary to the longer term story, the last month has been good for stockholders, with a share price gain of 10.0%. However, this may be a matter of broader market optimism, since stocks are up 4.9% in the same time.
See our latest analysis for RISE Education Cayman
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
RISE Education Cayman managed to increase earnings per share from a loss to a profit, over the last 12 months. Earnings per share growth rates aren't particularly useful for comparing with the share price, when a company has moved from loss to profit. So it makes sense to check out some other factors.
RISE Education Cayman managed to grow revenue over the last year, which is usually a real positive. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We know that RISE Education Cayman has improved its bottom line lately, but what does the future have in store? So we recommend checking out this free report showing consensus forecasts
A Different Perspective
While RISE Education Cayman shareholders are down 27% for the year, the market itself is up 3.0%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. With the stock down 5.3% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. Before deciding if you like the current share price, check how RISE Education Cayman scores on these 3 valuation metrics.