Wison Engineering Services Co. Ltd. (HKG:2236) shareholders might be concerned after seeing the share price drop 11% in the last week. But that doesn't detract from the splendid returns of the last year. Like an eagle, the share price soared 108% in that time. So it is important to view the recent reduction in price through that lense. Investors should be wondering whether the business itself has the fundamental value required to continue to drive gains.

While this past week has detracted from the company's one-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Wison Engineering Services went from making a loss to reporting a profit, in the last year.

The result looks like a strong improvement to us, so we're not surprised the market likes the growth. Generally speaking the profitability inflection point is a great time to research a company closely, lest you miss an opportunity to profit.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. This free interactive report on Wison Engineering Services' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's good to see that Wison Engineering Services has rewarded shareholders with a total shareholder return of 108% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 9% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

Wison Engineering Services is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.

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

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