There's 1001 reasons why a stock price goes up/down in short term, which very often it even has nothing to do with the company. Why this track attract many comments, it's because there is something interesting to comment about.
1) Comments and analysis are made on financial reports without due regards to share price movements at all. The same analysis and opinion will still be there even if the share price rose 200%. In fact, the share price is still at a 20% gain from its lowest point.
Commenting on share price before results are out could only be due to technical analysis reasons or speculations.
In fact, SGX had similar concerns and had queries for Eratat. They are doing their part in helping shareholders and potential shareholders to ask Eratat to address these common concerns. And it is up to us to interpret the data and response.
2) Not being vested does not mean one should never analyse a report. It is totally illogical to claim that one should not analyse a report or company because one is not vested. Analysis of different companies in the same sector helps an investor understand how companies in similar industries fare. Continuous analysis of different companies and trends help to identify trends within the sector.
It is detrimental to disregard reading and analysing key components of such a financial report even though you are not vested; there could always exist lessons to be learned and ideas to be picked up from a financial report.
I would presume you are vested into this company, and you do not analyse any company which you aren't vested at all. Good luck and may you prosper.
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[Window Chan 29-02-2012]:
when the share price goes up 50% , no one knows why. but when the share price goes down, so many people came out with their 2c worth.....the usual receivables, etc etc.... i wonder if the share price continues to go up, what do they have to say.... probably none.
for those not vested, should simply move on and pick on other stocks to Analyse. is eratat such an intersting stock that people who are not vested have to keep analysing it ???
I guess comments, regardless negative or positive, are good because NextInsight is afterall a hub for serious investors is not it not? Otherwise, a forum with wholly positive or wholly negative comments will only encourage groupthink, which is something successful investors should avoid.
That said, it is not true that this Eratat thread is active with negative comments. When the stock goes up, there will be forummers shouting "chiong, chiong, chiong", or there will be highlighting its strong orderbook etc.
If you go through the history of this stock, you will realise that those with the deepest critical analysis are those who bought the stock and lost quite a fair bit of money.
True, for those currently vested, they would want such negative and insightful analysis hidden. But I guess to the intention of the forummers providing insightful analysis is to alert people of the possible challenges to the company. Just read through the blog links posted here and you can see for yourself, these were the same people who had faith in the company. Share price wise, those who bought at IPO have lost 60% while those who bought a month ago at 15 cents are sitting on 20% loss.
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[Window Chan 29-02-2012]:
when the share price goes up 50% , no one knows why. but when the share price goes down, so many people came out with their 2c worth.....the usual receivables, etc etc.... i wonder if the share price continues to go up, what do they have to say.... probably none.
for those not vested, should simply move on and pick on other stocks to Analyse. is eratat such an intersting stock that people who are not vested have to keep analysing it ???
I welcome all views and I think coverup missed the point. when the share price goes down, they (like momoeagle who is not even vested but take so much effort to study the financials of eratat) can come out with all sorts of reasons , albeit the same old ones , to justify why the share price is going down. but when the share price shot up 50% in 2 weeks, nobody knows why. seems like the expert only know why the share price goes down, but not when the share price goes up.
how come those who analysed eratat to death did not come out to sound the same warning, that the share price rise might not be sustainable because of the reasons that they are citing now? funny don't you think ?
is the sell off really due to the reasons cited here by forumers ??? really ??? would they be saying the same thing if there is no sell off ??
many s chips got sold down today. anyone wants to make a guess why ?
Hi Window Chan,
you have totally missed the point.
1) I have been saying that Eratat is not a stock worth buying since March 2011 at 23 cts. I'm sharing what I have learned from Hongxing, one of my first few counters.
Incidentally, I made money from HongXing, but I still considered it a mistake purchase in terms of fundamentals. I made small money in Fuxing, but it's still a wrong purchase. I lost money in China Sky but I managed to cut it fast fortunately. Eratat, Hongxing, Fuxing and China Sky are in the same industry, and it makes perfect sense to study all, and understand my past mistakes.
So I have already sounded my warning in March 2011.
2) Looking at the fundamentals, I do not and will not bother about whether the share price is sustainable. I do not aim to speculate on sudden price rise and price drops, but look more objectively at the numbers presented. And yes, I will be still saying the same thing. My postings and analysis comes after their report, and I do not and will not speculate on the share price, be it rising or falling.
Share price is a reflection of what the market values, and not what I value it.
3) When you know what are the factors to look at, you do not need hours to crunch numbers. The cash flow statement tells everything you need to know, and you do not need to "analyse Eratat to death" at all.
Finally, as I have already mentioned, I would presume you are vested into this company, and you do not analyse any company which you aren't vested at all. Am I right to say that?
Window Chan,
I'm pretty sure most of us here are not short term traders and don't seek to predict or explain the short term price movements of stocks. During a high volume market, penny stocks in particular are able to move very considerably in short periods of time and often not due to factors intrinsic to the company itself, although in the long run, fundamentals shine through.
The reason why there has been a flurry of commentary on Eratat lately is not because the price has fallen dramatically but because it recently announced its results, which revealed new developments, some of which so egregious that they were certainly worth pointing out for the purpose of discussion. Topics like its continuingly poor cash flow, alarming levels of sales incentives and upcoming renovation subsidies would be very salient points of discussion even if Eratat's price had risen after its results were reported.
Back in November I did suggest that the renovation subsidies could come up to tens of millions (RMB) on the basis of a very reasonable estimate of a subsidy of roughly 250k(rmb) per store (there are about 700-1000 stores but not every store will be renovated) and it was scoffed by Eratat supporters as fear mongering and baseless speculation. Now not only has Eratat's recent response to SGX's query confirmed that this would likely be in the tens of millions, it was also revealed that they they spent over 50 million on sales incentives last quarter. As Momoeagle has pointed out, the total amount disbursed to distributors will likely exceed the 60+ million they raised during the dilutive placement last year, what generous suppliers they are!
I can also vouch for the fact that Momoeagle has been advising investors to avoid Eratat since March 2011, it would certainly be unfair to say that he is suddenly raising negative views on Eratat only because the price has fallen since it announced its results.
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