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54% earnings growth over 1 year has not materialized into gains for International Cement Group (SGX:KUO) shareholders over that period

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It’s easy to match the overall market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market – but in the process, they risk under-performance. That downside risk was realized by International Cement Group Ltd. (SGX:KUO) shareholders over the last year, as the share price declined 26%. That’s well below the market decline of 0.7%. Longer term shareholders haven’t suffered as badly, since the stock is down a comparatively less painful 12% in three years. More recently, the share price has dropped a further 15% in a month.

Given the past week has been tough on shareholders, let’s investigate the fundamentals and see what we can learn.

See our latest analysis for International Cement Group

To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).

During the unfortunate twelve months during which the International Cement Group share price fell, it actually saw its earnings per share (EPS) improve by 54%. Of course, the situation might betray previous over-optimism about growth.

It’s surprising to see the share price fall so much, despite the improved EPS. But we might find some different metrics explain the share price movements better.

International Cement Group’s revenue is actually up 15% over the last year. 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 below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
SGX:KUO Earnings and Revenue Growth October 4th 2022

It’s probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of International Cement Group’s earnings, revenue and cash flow.

A Different Perspective

Over the last year, International Cement Group shareholders took a loss of 26%. In contrast the market gained about 0.7%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Shareholders have lost 4% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. Although Baron Rothschild famously said to “buy when there’s blood in the streets, even if the blood is your own”, he also focusses on high quality stocks with solid prospects. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we’ve discovered 2 warning signs for International Cement Group that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SG exchanges.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an 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 account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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