Passive investing in index funds can generate returns that roughly match the overall market. But you can do better than that by choosing better-than-average stocks (as part of a diversified portfolio). Namely, the iDreamSky Technology Holdings Limited (HKG: 1119) The stock price is 55% higher than a year ago, much better than the market decline of around 5.9% (excluding dividends) during the same period. It’s a solid performance by our standards! However, the stock has not performed as well in the long run, with the stock only increasing by 2.9% in three years.
While the past week has hurt the company’s year-over-year performance, let’s take a look at recent trends in underlying activity and see if the gains have been aligned.
Check out our latest review for iDreamSky Technology Holdings
To paraphrase Benjamin Graham: In the short term the market is a voting machine, but in the long term it is a weighing machine. A flawed but reasonable way to gauge how sentiment is changing around a company is to compare earnings per share (EPS) with the stock price.
Over the past year, iDreamSky Technology Holdings has seen its earnings per share (EPS) fall below zero. While some may view this as temporary, we are a skeptical bunch, so we’re a little surprised to see the share price rise. We might get a clue to explain the stock price movement by looking at other metrics.
Earnings were fairly stable compared to last year, so more research may be needed to explain the rise in the share price.
The company’s revenue and profits (over time) are shown in the image below (click to see exact numbers).
It’s probably worth noting that we’ve seen some significant insider buying in the past quarter, which we see as positive. On the other hand, we believe that revenue and profit trends are much more meaningful measures of the business. So it makes perfect sense to check out what analysts think iDreamSky Technology Holdings will earn in the future (free profit forecast).
A different perspective
We are pleased to announce that iDreamSky Technology Holdings has rewarded shareholders with a 55% total shareholder return over the past year. This is better than the annualized TSR of 0.9% over the past three years. Given the track record of strong returns over varying time frames, it might be worth putting iDreamSky Technology Holdings on your watchlist. I find it very interesting to look at the stock price over the long term as an indicator of company performance. But to really understand better, we have to take other information into account as well. Concrete example: we have spotted 3 warning signs for iDreamSky Technology Holdings you need to be aware of it, and one of them is potentially serious.
iDreamSky Technology Holdings isn’t the only one to buy. So take a look at this free list of growing companies with insider buying.
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.
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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.