Optimism for Wanka Online (HKG:1762) has grown this past week, despite one-year decline in earnings

It hasn't been the best quarter for Wanka Online Inc. (HKG:1762) shareholders, since the share price has fallen 22% in that time. But that isn't a problem when you consider how the share price has soared over the last year. In that time, shareholders have had the pleasure of a 337% boost to the share price. Arguably, the recent fall is to be expected after such a strong rise. While winners often keep winning, it can pay to be cautious after a strong rise.

The past week has proven to be lucrative for Wanka Online investors, so let's see if fundamentals drove the company's one-year performance.

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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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the last year, Wanka Online actually saw its earnings per share drop 67%. This was, in part, due to extraordinary items impacting earning in the last twelve months.

Given the share price gain, we doubt the market is measuring progress with EPS. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.

We think that the revenue growth of 36% could have some investors interested. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

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. Dive deeper into the earnings by checking this interactive graph of Wanka Online's earnings, revenue and cash flow.

A Different Perspective

We're pleased to report that Wanka Online shareholders have received a total shareholder return of 337% over one year. That gain is better than the annual TSR over five years, which is 10%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. To that end, you should learn about the 3 warning signs we've spotted with Wanka Online (including 1 which shouldn't be ignored) .

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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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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.